The Alabama Office Furniture Company Manufactures a Variety of Prestige

question 4

Essay

The Alabama Office Furniture Company manufactures a variety of prestige boardroom chairs. Its job costing
system was designed using an activity-based approach. There are two direct cost categories (direct materials
and direct manufacturing labor) and three indirect cost pools. These three cost pools represent three activity
areas at the plant. Two styles chairs were produced in January, 2010, the executive chair and the chairman chair. Their quantities,
direct material costs, and other data for January follow: The direct manufacturing labor rate is $20 per hour.
(a) Compute the January total manufacturing costs and unit costs of the executive chair and the chairman chair
based on the activity-based approach.
(b) Repeat (a) assuming that the overhead cost will be allocated according to the traditional direct
manufacturing labor-hours.
2

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