Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2012, Come-On-In compiled the following data for the two products:
Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information:
Required:
a. Using the current traditional cost system, determine the estimated:
c. Review the machine related costs above. What is a likely explanation for machine related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)?
d. Using the activity-based costing data presented above,
e. Is the deluxe door as profitable as the original data estimated? Why or why not?

Question

Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2012, Come-On-In compiled the following data for the two products:
  Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information:
  Required:
a. Using the current traditional cost system, determine the estimated:
   c. Review the machine related costs above. What is a likely explanation for machine related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)?
d. Using the activity-based costing data presented above,
  e. Is the deluxe door as profitable as the original data estimated? Why or why not?

Quizplus · Accepted Answer

The Answer of Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labour dollars. For 2012, Come-On-In compiled the following data for the two products:
  Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information:
  Required:
a. Using the current traditional cost system, determine the estimated:
   c. Review the machine related costs above. What is a likely explanation for machine related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)?
d. Using the activity-based costing data presented above,
  e. Is the deluxe door as profitable as the original data estimated? Why or why not?

Come-On-In Manufacturing Produces Two Types of Entry Doors: Deluxe and Standard