Question: Can you guys please help me answer these practice test questions with working out . Thanks Best Safe Ltd. produces and sells two models of
Can you guys please help me answer these practice test questions with working out . Thanks
Best Safe Ltd. produces and sells two models of home security camera: ONE (since 2005) and ONE+. Selling prices per unit are $410 for model ONE and $660 for model ONE+. ONE+ was introduced in 2020 with new and smart functions. Daniel Smith - CEO of the company suggested that Best Safe Ltd should phase out model ONE and focus its marketing resources on model ONE+ only. The company has used a traditional costing system as a basis for pricing decisions. The following cost information was used over the previous year: Direct materials per unit Direct labour hours per unit Machine hours per unit Units produced Soldering Shipments Quality control Purchase orders Machining Machine set-ups Total overhead costs: Soldering Shipments Hourly wage for direct labour is $22 per hour. Manufacturing overhead costs were estimated at $2,880,000 and were allocated on the basis of machine hours. Quantity of activity driver consumed: Activity ONE Quality control Purchase orders Ricky Martin - the management accountant recommends the use of activity-based costing analysis to obtain a better picture of the true manufacturing costs of the two models. He collected the following data: Activity Model A $112.50 Machining Machine set-ups 1.5 9 9,000 Activity driver number of solder joints number of shipments number inspections number of orders machine hours number of set-ups 592,500 8,100 Model B $250 3.5 5 8,000 Estimated costs $565,200 $516,000 $744,000 $570,240 $34,560 $450,000 $2,880,000 ONE+ Total 192,500 785,000 number of solder joints 10,000 number of shipments 1,900 10,650 38,750 number inspections 28,100 40,050 54,990 95,040 number of orders 88,000 8,000 96,000 machine hours 8,000 7,000 15,000 number of set-ups Selling and administrative expenses per unit sold are $142.50 for model ONE and $150 for model ONE+, respectively. a. Calculate the unit manufacturing costs of models ONE and ONE+ under the traditional costing approach using machine hours for allocating manufacturing overheads. [10 marks] Click or tap here to enter text. b. Assuming use of activity-based costing, calculate the unit manufacturing costs of the two models given the activity analysis data above. [10 marks] Click or tap here to enter text. c. Explain the differences in manufacturing cost per unit calculated in part a and part b. [5 marks] Click or tap here to enter text. d. Calculate the operating profit per unit for models ONE and ONE+ under the activity- based costing approach and evaluate whether that Best Safe Ltd should phase out model ONE and focus its marketing resources on model ONE+ only according to the CEO's suggestion. [5 marks]
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
