Oven coffee fan Annual sales (units) 80000 4000 4000 Direct materials cost per unit 25 45...

	Oven	coffee	fan
Annual sales (units)	80000	4000	4000
Direct materials cost per unit	25	45	85
Direct labor cost per unit	15	30	30
Direct labor hours (DLH) per unit	1	2	2

The company has budgeted its annual indirect costs to be $8,736,000. For the past 5 years, the company’s pricing formula has been to set each appliance’s target price at 125% of its unit product cost. Recently, however, the microwave oven has come under increasing price pressure from competitors. The result was that the price of the microwave oven has been lowered to $110.

1.a. Calculate the per unit product cost for each appliance, based on the current job-order costing system.

b. Calculate the new per unit product cost for each appliance, based on the new data collected by Patty, using an activity-based costing system.

c. Compare the new per unit product cost (from the activity-based costing system) with the current per unit product cost (from the job-order costing system) for each appliance.

d. Calculate the target selling price per unit for each appliance, based on the current job-order costing system.

e. Calculate the new target selling price per unit for each appliance, based on the activity-based costing system. f. Compare the new target selling price per unit (from the activity-based costing system) with the current target selling price per unit (from the job-order costing system) for each appliance

		Cost Driver	Oven	Coffee	Fan
Machine maintenance and depreciation	3605000	Machine hours (MH)	39480	31584	60536
Engineering and product repair	1860000	Engineering hours (EH)	27040	9464	31096
Material purchasing, receiving, and handling	1705000	Number of material orders (orders)	5328	2812	6660
Miscellaneous manufacturing overhead	1566000	Square feet of factory space (Sq. ft.)	19,206	24444	43650

Expert Solution

ekkarill92 answered 2 years ago

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