Prescott Corp. manufactures computer desks in its Seville, Ohio, plant. The company uses activity- based costing to allocate all manufacturing conversion costs (direct labor and manufacturing overhead). Its activities and related data follow:

Prescott Produced two styles of desks in March: the Standard desk and the 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 con-ducted of post- manufacturing activities, such as distribution, marketing, and customer service. The post- manufacturing costs were $ 23 per Standard and $ 22 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 Prescott€™s managers set for Standard desks to earn a $ 41 profit per desk?

Transcribed Image Text:

Activity Materials handling Assembling Painting Budgeted Cost of Activity $330,000 $2,600,000 Cost Allocation Rate $ 0.70 $16.00 $ 5.10 Allocation Base Number of parts Direct labor hours 150,000 Number of painted desks Total Direct Labor Hours 5,700 1,000 Total Units Total Direct otNumber Assembling Product Standard desk.. Unpainted desk Produced Materials Costs 5,500 3,000 $99,000 $18,000 of Parts 118,500 28,500