Question

Kerston Cameras, Inc., manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Kerston uses an activity-based costing system. The following are the relevant cost data for the previous month.


Kerston’s facility has the capacity to operate 4,500 machine hours per month.

Required
Round your figures to two decimal points.
a. Compute the cost per unit for each product.
b. The current market price for products comparable to Model ZM is $142 and for DS is $54. If Kerston sold all of its products at the market prices, what was its profit or loss for the previous month?
c. A market expert believes that Kerston can sell as many cameras as it can produce by pricing Model ZM at $140 and Model DS at $52. Kerston would like to use those estimates as its target prices and have a profit margin of 20 percent of target prices. What is the target cost for each product?
d. Is there any way for the company to reach its targetcosts?


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  • CreatedFebruary 07, 2014
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