ABC.pdf - ABC at Davy Electronics Objectives 1 To develop...

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Page 1 of 1 ABC at Davy Electronics Objectives: 1. To develop quantitative and spreadsheet skills by preparing an ABC analysis. 2. To develop critical thinking and communication skills by describing ABC and its implications. Davy Electronics, a division of Chris Corporation, manufactures two large-screen TVs, the Alpha, which has been produced since 2015 and sells for $950, and the Beta, a newer model introduced in early 2019 that sells for $1,200. Based on the following income statement management, the senior management team at Davy has decided to concentrate Davy’s marketing resources on the Beta model and to begin to phase out the Alpha model. Alpha Beta Total Revenues $ 20,900,000 $ 4,800,000 $25,700,000 Cost of goods sold $ 12,540,000 $ 3,192,000 $15,732,000 Gross margin $ 8,360,000 $ 1,608,000 $ 9,968,000 Selling and administrative expenses $ 5,830,000 $ 978,000 $ 6,808,000 Operating income $ 2,530,000 $ 630,000 $ 3,160,000 Units produced and sold 22,000 4,000 Net income per unit sold $115.00 $157.50 Unit cost for Alpha and Beta are as follows: Alpha Beta Direct materials $208 $584 Direct labor: Alpha 1.5 hrs x $12; Beta 3.5 hrs x $12 18 42 Machine costs: Alpha 8 hrs x $18; Beta 4 hrs x $18 1 144

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