B & B Electronics Company manufactures two large-screen television models: the Deluxe, which has been produced for
Question:
B & B Electronics Company manufactures two large-screen television models: the Deluxe, which has been produced for many years and sells for $900, and the Flat, a new model, which sells for $1,260. Based on the following income statement for 2012, the CFO at B & B has decided to concentrate the marketing resources on the Flat model and to begin to phase out the Deluxe model.
The standard unit costs for the Flat and Deluxe models are as follows:
Manufacturing overhead was applied on the basis of machine hours at a predetermined rate of $25 per hour. B & B Electronics Company's CFO is in favour of the use of an activity-based costing system and has gathered the following information about the company's manufacturing overhead costs for 2012:
Instructions
Using activity-based costing, determine whether B & B Electronics should continue to emphasize the Flat model and phase out the Deluxe model.
Step by Step Answer:
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly