Reference no: EM132204750

Activity Based Costing. Come-On-In company produces two types of entry doors: Standard and Deluxe. The assignment basis for manufacturing overheads has been direct labour hours. For 2016, the company complied the following data for the two products: Standard Deluxe Sales units 400,000 Doors 50,000 Doors Sales price per unit $ 475 $ 690 Direct material cost per unit $ 90 $ 120 Direct labour cost per unit $ 40 $ 60 Manufacturing overhead cost per unit $ 120 $ 80 During 2016, the company purchased a state-of-art robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. The information gathered is as follows: Activity Cost Driver Standard Deluxe Total Cost Setups Number of setups 100 400 500 $ 2,900,000 Machine-related Number of machine hours 300,000 300,000 600,000 $ 44,100,000 Packing Number of shipments 200,000 50,000 250,000 $ 5,000,000 Required: 5a. Using the current cost system, determine the total cost of manufacturing one unit of each product and the profit per unit for each product. 5b. Under the current cost system, estimated manufacturing overhead per unit are less for the deluxe door ($80) than the standard door ($120). What is a likely explanation for this? 5c. Using the activity-based costing data, compute the cost driver rate for each overhead activity. 5d. Compute the revised manufacturing overhead cost per unit for each type of product. 5e. Is the deluxe door as profitable as the original data estimated using previous cost system? Why or why not? Explain.