Question

Horten Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of 2018 (during which Horten made 70,000 tennis racquets and 30,000 badminton racquets). Direct Cost Tennis Racquet (TR) Badminton Racquet (BR) Direct materials $ 28 per unit $ 20 per unit Direct labor 34 per unit 28 per unit Category Estimated Cost Cost Driver Amount of Cost Driver Unit level $ 750,000 Number of inspection hours TR: 15,000 hours; BR: 10,000 hours Batch level 250,000 Number of setups TR: 80 setups; BR: 45 setups Product level 150,000 Number of TV commercials TR: 4; BR: 1 Facility level 650,000 Number of machine hours TR: 30,000 hours; BR: 35,000 hours Total $ 1,800,000 Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment. Required Compute the cost per unit for each product. If management wants to price badminton racquets 30 percent above cost, what price should the company set?

You have answer in the data base on over head allocation tennis for units 450,00 not sure how to get this .For each of overhead allocation I need to give weight and rate. If get do one I can do the rest . How would calculate minimum price for the tennis racquet

Answer 1

Allocation of Overhead Cost
Category	Estimated Cost (A)	Activity Pool (B)	Cost Driver	Activity Rate (C=A/B)	Tennis Racquet		Badminton Racquet
	$				No. of Activity (D)	$(D*C)	No. of Activity ( E)	$ (EXC)
Unit Level	$7,50,000	25000	Number of inspection hours	$30.00	15000	$4,50,000	10000	$3,00,000
Batch Level	$2,50,000	125	Number of setups	$2,000.00	80	$1,60,000	45	$90,000
Product Level	$1,50,000	5	Number of TV commercials	$30,000.00	4	$1,20,000	1	$30,000
Facility Level	$6,50,000	65000	Number of machine hours	$10.00	30000	$3,00,000	35000	$3,50,000
Total overhead cost	$18,00,000					$10,30,000		$7,70,000
Units produced						70,000		30,000
Overhead cost per unit						$14.71		$25.67

Computation of price per unit :
	Tennis Racquet	Badminton Racquet
	$	$
Direct Material	$28.00	$20.00
Direct Labor	$34.00	$28.00
Overhead cost per unit	$14.71	$25.67
Total cost per unit	$76.71	$73.67
Price of badminton racquets = $ 73.67 x 130 % = $ 95.77.