In: Accounting
XYZ Manufacturing makes two models of beach chairs: regular and deluxe. Summary data for the two products showed the following:
Unit Costs | Regular | Deluxe |
Direct Materials | $65.00 | $105.00 |
Direct Labor($20/hour) | 10.00 |
20.00 |
Manufacturing Overhead* | 4.80 | 9.60 |
* Under the company's current costing, manufacturing overhead is allocated on the basis of direct labour hours.
The overhead for the year follows:
Materials handling $ 300,000
Setups 400,000
General factory overhead 500,000
Total $1,200,000
The following table presents the activity levels that relate to the overhead costs:
Cost Driver | Regular | Deluxe | Total |
Number of parts | 600,000 | 900,000 |
1,500,000 |
Number of Setups | 75 | 50 | 125 |
Direct Labour Hours | 45,000 | 80,000 | 125,000 |
The market price for the regular chairs is $ 104 with expected sales of 40,000 units. The company expects
to sell 25,000 deluxe chairs at a selling price of $170 per unit.
Required:
Determine the unit gross profit for the regular chair using both traditional and activity-based costing
methods.