Question

Carson Tools Company has two production departments in its manufacturing facilities. Home tools specializes in hand tools for individual home users, and professional tools makes sophisticated tools for professional maintenance workers. Carson’s accountant has identified the following annual costs associated with these two products:
Financial data
Salary of vice president of production .......... $200,000
Salary of manager, home tools ............. 60,000
Salary of manager, professional tools .......... . 75,000
Direct materials cost, home tools ............ 300,000
Direct materials cost, professional tools ........ 375,000
Direct labor cost, home tools ............. 336,000
Direct labor cost, professional tools ........... 414,000
Direct utilities cost, home tools ............ 45,000
Direct utilities cost, professional tools .......... 60,000
General factorywide utilities ............. 42,000
Production supplies ................ 54,000
Fringe benefits .................... 150,000
Depreciation .................... 360,000
Nonfinancial data
Machine hours, home tools ............. 2,500
Machine hours, professional tools .......... 3,500

Required
a. Identify the costs that are the (1) direct costs of home tools, (2) direct costs of professional tools, and (3) indirect costs.
b. Select the appropriate cost drivers and allocate the indirect costs to home tools and to professional tools.
c. Assume that each department makes only a single product. Home tools produces its Deluxe Drill for home use, and professional tools produces the Professional Drill. The company made 30,000 units of Deluxe Drill and 20,000 units of Professional Drill during the year. Determine the total estimated cost of the products made in each department. If Carson prices its products at cost plus 30 percent of cost, what price per unit must it charge for the Deluxe Drill and the Professional Drill? Round your figures to 2 decimal points.



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  • CreatedFebruary 07, 2014
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