Best Solid Doors Inc. (BSD) is a Malaysia-based door manufacturer. It initially produced only interior doors, but

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Best Solid Doors Inc. (BSD) is a Malaysia-based door manufacturer. It initially produced only interior doors, but expanded production to include exterior several years ago. The company uses a simple costing system to record and calculate costs for two types of doors. Under this simple costing system, there re two direct manufacturing cost categories and one manufacturing overhead cost pool. Manufacturing overhead cost are allocated to the two types of doors based on machine hours.

BSD sets product price as unt production cost plus 50% mark up. According to past sales records, BSD's interior doors were very competitive in the market because of affordable prices and consistent quality. However, the company has observed a decline in the market share of its interior doors in recent years, especially after the introduction of its exterior doors.

Information related to BSD's production for the coming year follows:

	INTERIOR	EXTERIOR
Units produced and sold	6,400	3,600
Direct material cost per unit	$60	$90
Direct labor cost per hour	$32	$32
Direct labor hours per unit	3	4.5
Production runs	50	200
Material moves	144	336
Machine set ups	90	310
Machine hours	12,000	8,000
Number of inspections	500	300

The owner of BSD recently hear about activity-based costing (ABC) system and is curious about how an ABC system would affect the company's product costing. After analysing te manufacturing overhead cists of BSD, five manufacturing overhead cost pools were identified. These included production scheduling, material handling, machine setup, assembly, and inspection. BSD predicted the following date for the coming year:

Activity	Activity cost	Activity cost driver
Production scheduling	$190,000	Production runs
Material handling	$90,000	Material moves
Machine setup	$50,000	Machine set up
Assembly	$120,000	Machine hours
Inspection	$16,000	Number of inspections

Question 1A

Apply the plant-wide overhead rate method under BSD's current simple costing system to calculate the unit production cost of the interior and exterior doors respectively.

Question 1B

Compute the unit production cost of the interior and exterior doors respectively using an activity-based costing system. Round your answers to the nearest dollar.

Question 1C

Compare the unit production cost of the interior and exterior doors in requirements (a) and (b), and explain the impact of misleading cost information to BSD.