1. (2b)Deluxe chair, gross margin = 3% of sales See, I told you we made a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. (2b)Deluxe chair, gross margin = 3% of sales "See, I told you we made a good decision by introducing the Business and Deluxe chairs. Look at the profits generated by the two chairs that we are selling at a premium." These were the words of Linda Badger, CEO of Badger Chair Company (BCC). However, Steve Radcliffe, the VP of operations, did not echo her enthusiasm. "Linda, I must say my people on the shop floor are not too happy with the accounting report. They are still unable to believe that the Business and Deluxe chairs made money. According to them the production of these chairs created nothing but problems." Badger Chair Company makes four different types of chairs: Regular, Standard, Business, and Deluxe. The latter two types of chairs were introduced in 2022. The production and sales of each type of chair were as follows during the last two years: Regular Standard Business Deluxe 2021 25,000 25,000 2022 20,000 20,000 5,000 5,000 Price (2022) $36 $44 $69 $89 BCC uses a normal costing system wherein it traces direct material and direct labour costs to the individual products and allocates overhead costs by applying predetermined departmental overhead rates to the actual volume of the allocation base pertaining to each department. For 2022, the following overhead costs were estimated in each of the two departments: Estimated Overhead Cost and Activity Level Machining department $548,000 (206,000 machine-hours) Assembly department $499,000 (349,000 direct labour-hours) Consider the following information regarding the actual consumption of resources by each of the four products in 2022: Regular Standard Business Deluxe Machine-hours 91,000 82,000 18,000 15,000 Direct labour-hours 130,000 150,000 30,000 39,000 Prime costs (per unit) $15 $23 $35 $40 Required: 1. Compute the profitability of each type of chair (please show all the computational steps). Is there a reason for Linda Badger to be excited about the new chairs? Briefly explain. 1. (2b)Deluxe chair, gross margin = 3% of sales "See, I told you we made a good decision by introducing the Business and Deluxe chairs. Look at the profits generated by the two chairs that we are selling at a premium." These were the words of Linda Badger, CEO of Badger Chair Company (BCC). However, Steve Radcliffe, the VP of operations, did not echo her enthusiasm. "Linda, I must say my people on the shop floor are not too happy with the accounting report. They are still unable to believe that the Business and Deluxe chairs made money. According to them the production of these chairs created nothing but problems." Badger Chair Company makes four different types of chairs: Regular, Standard, Business, and Deluxe. The latter two types of chairs were introduced in 2022. The production and sales of each type of chair were as follows during the last two years: Regular Standard Business Deluxe 2021 25,000 25,000 2022 20,000 20,000 5,000 5,000 Price (2022) $36 $44 $69 $89 BCC uses a normal costing system wherein it traces direct material and direct labour costs to the individual products and allocates overhead costs by applying predetermined departmental overhead rates to the actual volume of the allocation base pertaining to each department. For 2022, the following overhead costs were estimated in each of the two departments: Estimated Overhead Cost and Activity Level Machining department $548,000 (206,000 machine-hours) Assembly department $499,000 (349,000 direct labour-hours) Consider the following information regarding the actual consumption of resources by each of the four products in 2022: Regular Standard Business Deluxe Machine-hours 91,000 82,000 18,000 15,000 Direct labour-hours 130,000 150,000 30,000 39,000 Prime costs (per unit) $15 $23 $35 $40 Required: 1. Compute the profitability of each type of chair (please show all the computational steps). Is there a reason for Linda Badger to be excited about the new chairs? Briefly explain.
Expert Answer:
Answer rating: 100% (QA)
From the details given it is required to figure out the profitability of 4 different types of chair and provide a comment on why the producer should b... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
Students also viewed these accounting questions
-
Badger Chair Company makes four different types of chairs: Regular, Standard, Business, and Deluxe. The latter two types of chairs were introduced in 2022. The production and sales of each type of...
-
Steve and Linda Hom live in Bartlesville, Oklahoma. Two years ago, they visited Thailand. Linda, a professional chef, was impressed with the cooking methods and the spices used in the Thai food....
-
As VP for operations at Brain Normoyle Engineering, you must decide which product design, A or B, has the higher reliability. B is designed with backup units for components R3 and R4. What is the...
-
A unity negative feedback loop has the loop transfer function We know from the underlying physics of the problem that the parameter a can vary only between 0 (a) The steady-state tracking error due...
-
Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the protability of the products is tied strongly to the ability to nd...
-
Use a linear interpolation to estimate properties of ammonia to fill out the table below P [kPa] T [ C] v [m3/kg] x a) 550 0.75 b) 80 20 c) 10 0.4
-
The Bonferroni adjustment is made by multiplying the P-value by the number of___________________ . In Exercises 3 and 4, fill in each blank with the appropriate word or phrase.
-
A by- product of phosphate fertilizer production is pyrite waste, which contains arsenic and lead. From 1884 to 1906, seven phosphate fertilizer plants operated on a forty- three- acre operated on a...
-
Question 1 What is a Marine Port What is a Transit Harbour, Port of Convenience, Gateway Port Question 2. Who is the Harbour Master and what is his role in relation to the safety of the Harbour...
-
The worksheet used to produce Figure 23.2 is on the authors web site. How does the loss distribution change when the loss severity has a beta distribution with upper bound of 5, lower bound of zero,...
-
Bill Pope has developed a new device that is so exciting he is considering quitting his job in order to produce and market it on a large-scale basis. Bill will rent a garage for $300 per month for...
-
What is your vision of the future of sport management?
-
Explain why each of the four steps of delegating is necessary.
-
What is the first and most important question you ask to determine what and what not to delegate?
-
How does the systems effect relate to the four variables of change?
-
How do the management functions relate to change?
-
when a central bank buys financial assets from a commercial bank. Who decides the interest rates
-
The swap spread is the difference between the swap rate and the equivalent-maturity Treasury bond yield. Explain why a widening swap spread may be a signal of deteriorating economic conditions. Plot...
-
The president of the retailer Prime Products has just approached the companys bank with a request for a $30,000, 90-day loan. The purpose of the loan is to assist the company in acquiring...
-
Flight Caf is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The companys planning budget for July appears below: In July, 17,800 meals were...
-
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of...
-
When a predecessor auditor reissues the report on the prior period's financial statements at the request of the former client, the predecessor auditor should a. Indicate the introductory paragraph of...
-
When audited financial statements are presented in a client's document containing other information, the auditor should a. Perform inquiry and analytical procedures to ascertain whether the other...
-
Which of the following events occurring after the issuance of an auditor's report most likely would cause the auditor to make further inquiries about the previously issued financial statements? a. A...
Study smarter with the SolutionInn App