|
Overhead costs have been divided into three cost pools that use the following activity drivers.
|
|
Product
|
# of Setups
|
Machine Hours
|
Packing Orders
|
|
X
|
24
|
1,300
|
75
|
|
Z
|
24
|
3,900
|
225
|
|
Cost per Pool
|
$60,000
|
$150,000
|
$30,000
|
|
|
|
|
|
|
a. What is the allocation rate for Product Z per setup using activity-based costing?
|
|
b. What is the allocation rate for Product Z per machine hours using activity-based costing?
|
|
c. What is the allocation rate for Product Z per packing order using activity-based costing?
|
[removed]
4. (TCO 8) Household Manufacturing Inc. sells its product for $45 each.
|
Sales volume averages 2,000 units per year.
|
|
|
|
Recently, its main competitor reduced the price of its product to $30.
|
|
|
Maximum expects sales to drop dramatically unless it matches the competitor’s price.
|
|
In addition, the current profit per unit must be maintained.
|
|
|
Information about the product (for production of 2,000) is as follows:
|
|
|
|
|
Standard Quantity
|
Actual Quantity
|
Actual Cost
|
|
Materials (pounds)
|
|
3,200
|
3,500
|
$35,000
|
|
Labor (hours)
|
|
900
|
1,000
|
$30,000
|
|
Setups (hours)
|
|
0
|
125
|
$3,000
|
|
Material handling (moves)
|
|
0
|
200
|
$4,000
|
|
Warranties (number repaired)
|
|
0
|
450
|
$11,000
|
|
|
|
|
|
|
|
Required:
|
|
|
|
|
|
a. Calculate the target cost for maintaining current market share and profitability.
|
|
b. Calculate the non-value-added cost per unit.
|
|
|
|
c. If non-value-added costs can be reduced to zero, can the target cost be achieved?
|
(Points : 40)
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