Russell Furniture manufactures computer desks in its Westlake, 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:

The company produced two styles of desks in March: the Standard desk and the ­Unpainted desk. Data for each follow:

Requirements
1. Compute the perunit 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 $ 20 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 management set for Standard desks to earn a $ 40 profit perdesk?

Transcribed Image Text:

Activity Materials handling Assembling Painting Budgeted Cost of Activity S 320,000 $2,400,000 Cost Allocation Rate $ 0.90 $17.00 $ 5.10 Allocation Base Number of parts Direct labor hours 180,000 Number of painted desks Total Direct Costs $95,000 Total Assembling Hours 5,900 Total Units Materials Total Numbr Direct Labor Produced Product of Parts Standard desk 5,500 119,500 Unpainted desk 3.000 $23,000 29500 600