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:
Units produced and sold
Direct labour hours used
Direct labour cost
Number of times each unit is handled
Number of cuts per unit
Number of design changes (total)
Number of product setups (total)
The actual manufacturing support costs incurred were as follows:
The direct material cost for the Intrepid model is $500 per unit, and for the Explorer model, $700 per unit.
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:
Whyte identified the following target costs for various truck components:
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