Activity-based job c o s ting.

Activity-based job c o s ting.

Baden-Möbel GmbH 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 labour) and three indirect-cost pools. These three cost pools represent three activity areas at the plant:

Manufacturing activity area	Budgeted costs for 2008	Cost driver used as allocation base	Cost-allocation rate
Materials handling	200 000	Parts	€0.25
Cutting	2 160 000	Parts	2.50
Assembly	2 000 000	Direct manufacturing	25.00

labour-hours

Two styles of chairs were produced in March, the executive chair and the chairman chair. Their quantities, direct material costs and other data for March 2008 are as follows:

	Units	Direct material	Number	Direct manufacturing
	produced	costs	of parts	labour-hours
Executive chair	5000	€600 000	100 000	7 500
Chairman chair	100	25 000	3 500	500

The direct manufacturing labour rate is €2 per hour. Assume no opening or closing stock.

Required

1 Calculate the March 2008 total manufacturing costs and unit costs of the executive chair and the chairman chair.

2 Suppose that the upstream activities to manufacturing (R&D and design) and the down- stream activities (marketing, distribution and customer service) were analysed. The unit costs in 2008 were budgeted to be as follows:

Upstream Downstream activities activities

Executive chair	€60	€110
Chairman chair	146	236

Calculate the full product costs per unit of each line of chairs. (Full product costs are the sum of the costs in all business function areas.)

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