Otto 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. Otto’s accountant has identified the following annual costs associated with these two products: 

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 Otto 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? 

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Financial data Salary of vice president of production Salary of manager, home tools Salary of manager, professional tools Direct materials cost, home tools Direct materials cost, professional tools Direct labor cost, home tools Direct labor cost, professional tools Direct utilities cost, home tools Direct utilities cost, professional tools General factorywide utilities Production supplies Fringe benefits Depreciation Nonfinancial data $150,000 54,000 43,500 300,000 375,000 336,000 414,000 75,000 30,000 31,500 40,500 150,000 360,000 Machine hours, home tools Machine hours, professional tools 4,000 2,000