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the Intrepid and Explorer.

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November 25, 2016 0 Comment

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The Intrepid and Explorer.
Braithwaite Company manufactures two types of kayaks, the Intrepid and Explorer. Previously, the company has allocated manufacturing support costs using a plant-wide rate based on direct labour hours. It has been suggested that the company consider assigning support costs to the equipment using activity-based costing. The following data has been collected:
Item
Intrepid
Explorer
Units produced and sold
50,000
20,000
Direct labour hours used
25,000
20,000
Direct labour cost
$75,000
$60,000
Number of times each unit is handled
3
5
Number of cuts per unit
2
6
Number of design changes (total)
5
10
Number of product setups (total)
30
40
The actual manufacturing support costs incurred were as follows:

Cost Pool
Related Costs
Handling
Cutting
Design changes
Setups
Total
The direct material cost for the Intrepid model is $500 per unit, and for the Explorer model, $700 per unit.
Required:
1. Determine the unit cost of each product using direct labour hours to allocate all manufacturing support costs.
2. Determine the unit cost of each product using activity-based costing.
3. Explain why the unit cost is different in requirements 1 and 2.
Problem 6 (12 marks)
Whyte Trucks Inc. produces large, heavy duty trucks. It is attempting to reduce manufacturing costs. It polled customers with respect to product requirements and obtained the following information:
Category
Driver comfort
Fuel efficiency
Safety
Whyte identified the following target costs for various truck components:
Function
group
Frame
Engine
Body
Other
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