Question

Applewood Electronics manufactures two large-screen, high-definition television (HDTV) models—the Monarch, which has been produced since 2010 and sells for $900, and the Regal, a model introduced in early 2012 that sells for $1,140. Applewood’s CEO, Harry Hazelwood, suggested that the company concentrate its marketing resources on the Regal model and begin to phase out the Monarch model.

Applewood currently uses a traditional costing system. The following cost information has been used as a basis for pricing decisions over the past year:

Per-Unit Data		Monarch		Regal
Direct materials		$208		$584
Direct labour hours		1.5		3.5
Machine hours		8		4
Units produced		22,000		4,000

The direct labour cost is $12 per hour, and the machine usage cost is $18 per hour. Manufacturing overhead costs were estimated at $4,800,000 and were allocated on the basis of machine hours.

Martin Alecks, the new company controller, suggested that an activity-based costing analysis first be run to get a better picture of the true manufacturing cost. The following data were collected:

Activity		Cost		Traceable
Centre		Driver		Costs
Soldering		Number of solder joints		$942,000
Shipments		Number of shipments		860,000
Quality control		Number of inspections		1,240,000
Purchase orders		Number of orders		950,400
Machining		Machine hours		57,600
Machine setups		Number of setups		750,000
Total traceable costs				$4,800,000

		Number of Events
Activity		Monarch		Regal		Total
Soldering		1,185,000		385,000		1,570,000
Shipments		16,200		3,800		20,000
Quality control		56,200		21,300		77,500
Purchase orders		80,100		109,980		190,080
Machining		176,000		16,000		192,000
Machine setups		16,000		14,000		30,000

Selling, general, and administrative expenses per unit sold are $265.00 for Monarch and $244.60 for Regal.

Calculate the manufacturing cost per unit for Monarch and Regal under a traditional costing system. (Round answers to 2 decimal places, e.g. 5.69.)

		Monarch		Regal
Cost per unit		$		$

Calculate the manufacturing cost per unit for Monarch and Regal under an ABC system. (Round answers to 2 decimal places, e.g. 5.69.)

		Monarch		Regal
Cost per unit		$		$

Calculate the operating profit/loss per unit for Monarch and Regal under a traditional costing system.

(Round answers to 2 decimal places, e.g. 6.59. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Monarch		Regal
Profit/(Loss)		$		$

Calculate the operating profit/loss per unit for Monarch and Regal under an ABC system.

(Round answers to 2 decimal places, e.g. 6.59. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Monarch		Regal
Profit/(Loss)		$		$

Answer 1