Fuller Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Beth Orpin, the cost accountant, prepared for the third quarter of 2014 (during which Fuller made 70,000 tennis racquets and 30,000 badminton racquets).

Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment.

Round your figures to two decimal points.
a. Compute the cost per unit for each product.
b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
c. The market price of tennis racquets has declined substantially because of new competitors entering the market. Management asks you to determine the minimum cost of producing tennis racquets in the short term. Provide thatinformation.

  • CreatedFebruary 07, 2014
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