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In: Accounting

XYZ Manufacturing makes two models of beach chairs: regular and deluxe. Summary data for the two...

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.

Expert Solution

ekkarill92 answered 3 years ago

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