Problem styled questions 822823 and 824 from textbook

This preview shows page 2 - 5 out of 10 pages.

Problemstyledquestions8.22,8.23and8.24from8.22Costing; ABMApplewood Electronics manufactures two large-screen television models, the Monarch,which has been produced since 2005 and sells for $900, and the Regal, a new modelintroduced in early 2011 that sells for $1,140. Applewood’s CEO, Harry Hazelwood,suggested that the company should concentrate its marketing resources on the Regal modeland begin to phase out the Monarch model. Applewood currently uses a conventional costingsystem. The following cost information has been used as a basis for pricing decisions over thepast year.Direct labour cost is $12 per hour, and the machine usage cost is $18 per hour. Manufacturingoverhead costs were estimated at $4,800,000 and were allocated on the basis of machinehours.Martin Alecks, the new company controller, suggested that an activity-based costing analysisfirst be run to get a better picture of the true manufacturing cost. The following data werecollected:textbook
Selling, general, and administrative expenses per unit sold are $265.00 for Monarch and$244.50 for Regal.Required(a)Calculate the manufacturing cost per unit for Monarch and Regal under:(a.i)A conventional costing system(a.ii)The ABC system(b)Explain the differences in manufacturing cost per unit calculated in part (a).(c)Calculate the operating profit per unit for Monarch and Regal under:(a.i)A conventional costing system(a.ii)The ABC system(d)Should Applewood concentrate its marketing efforts on Monarch or on Regal? Explainhow the use of ABC affects your recommendation.(a)
Estimated machine hours:Monarch (8.0 hours × 22 000 units)176 000Regal (4.0 hours × 4000 units)16000Total estimated machine hours192000Estimated allocation rate per machine hour ($4 800 000/192 000)$25.00The total manufacturing cost per unit is the sum of per unit direct material, directlabour, machine usage and allocated overhead as follows:MonarchRegalDirect material$208.00$584.00Direct labour1.5 DL hrs × $1218.003.5 DL hrs × $1242.00Machine usage8 mach hrs × $18144.004 mach hrs × $1872.00Overhead8 mach hrs × $25200.004 mach hrs × $25100.00Total$570.00$798.00

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 10 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
N/A
Professor
NoProfessor
Tags

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture