Johnston€™s Office Department manufactures computer desks in its Brandon, Manitoba, plant. The company uses activity-based costing to allocate all manufacturing conversion costs (direct labour and manufacturing overhead). Its activities and related data follow:

Johnston€™s produced two styles of desks in March: the Standard desk and Unpainted desk. Data for each follow:

Requirements
1. Compute the per-unit manufacturing product cost of Standard desks and Unpainted desks.
2. Premanufacturing activities, such as product design, were assigned to the Standard desks at $4 each and to the Unpainted desks at $3 each. Similar analyses were conducted of post-manufacturing activities such as distribution, marketing, and customer service. The post-manufacturing costs were $22 per Standard and $19 per Unpainted desk. Compute the full product costs per desk.
3. Which product costs are reported in the external financial statements? Which costs are used for management decision making? Explain the difference.
4. What price should Johnston€™s managers set for Standard desks to earn a $39 profit per desk?

Transcribed Image Text:

Budgeted Cost of Activity Allocation Base Activity Materials handling Assembling.. Painting.... Cost Allocation Rate 0.60 13.00 5.30 300,000 Number of parts 2,500,000 Direct labour hours 170,000 Number of painted desks Total Total Total Direct Total Assembling Units Materials Number Direct Product Standard desk Unpainted desk Produced Costs of Parts Labour Hours 6,500 $98,000 120,500 6,300 2,000 18,000 30,500 1,000