Silva Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva:

The market price for office chairs comparable to Model Diamond is $180 and to Model Gold is $110.
Required
a. Compute the cost per unit for both products. Round your figures to two decimal points.
b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 150 units of Model Diamond per batch and 245 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. Round your figures to two decimal points.
c. Is there any side effect if Ms. Silva increases the production batch size by 100 percent?

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Direct Cost per Unit Model Diamond (D) Model Gold (G) $45 per unit $30 per unit Direct materials Direct labor $24/hour x 2 hours production time $24/hour x 1 hour production time Category Estimated Cost Cost Driver Use of Cost Driver Unit leve Batch level Product level Facility level Total $ 300,000 Number of units Number of setups Number of TV commercials Number of machine hours D: 15,000 units; G: 35,000 units D: 104 setups, G: 146 setups D: 5; G: 10 D: 1,500 hours; G: 3,500 hours 450,000 500,000 $2,000,000