McKnight Corp. manufactures computer desks in its Orrville, 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:
1. Compute the per-unit manufacturing product cost of Standard desks and Unpainted desks.
2. Pre-manufacturing activities, such as product design, were assigned to the Standard desks at $5 each and to the Unpainted desks at $4 each. Similar analyses were conducted of post-manufacturing activities, such as distribution, marketing, and customer service. The post-manufacturing costs were $22 per Standard and $21 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 McKnight's managers set for Standard desks to earn a $42 profit per desk?
This question was answered on: Jul 11, 2017
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