1. Calculate the unit manufacturing cost of the Serta and the Tempu beds using the company’s current overhead costing procedures.
2. Calculate the unit manufacturing cost of the Serta and the Tempu using activity-based costing. Show your calculations using a simple Excel spreadsheet.
3. Is the cost of the Tempu bed distorted by the use of machine hours to allocate total manufacturing overhead to production, and, if so by how much per unit?
4. Assume that the current selling price of the Tempu bed is $280 and the marketing director has proposed to offer a $30 discount to increase sales. Is the discount advisable? Advise management. Show supporting calculations.
5. ‘Conventional costing will always distort product costs.’ Discuss the validity of this statement.