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Item 1

Item 1 100 points

The following data are for the two products produced by Tadros Company.

	Product A			Product B
Direct materials	$	14 per unit		$	28 per unit
Direct labor hours		0.3 DLH per unit			1.6 DLH per unit
Machine hours		0.2 MH per unit			1.2 MH per unit
Batches		110 batches			220 batches
Volume		10,000 units			2,000 units
Engineering modifications		11 modifications			55 modifications
Number of customers		500 customers			400 customers
Market price	$	35 per unit		$	95 per unit per unit

The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.

	Costs			Driver
Indirect manufacturing
Engineering support	$	24,500		Engineering modifications
Electricity		22,000		Machine hours
Setup costs		42,000		Batches
Nonmanufacturing
Customer service		72,000		Number of customers

3.1 Determine the manufacturing cost per unit of each product line using ABC.
Engineering Support
Electricity
Setup
Overhead Assigned	Activity Driver		Activity rate		Total Overhead Cost
Product A
Engineering support
Electricity
Setup
Product B
Engineering support
Electricity
Setup
Total manufacturing costs		Product A	Product B
Direct Materials per unit
Direct Labor per unit
Overhead per unit
Total manufacturing cost per unit
3.2 What is the gross profit per unit?
		Product A	Product B
Market price
		(22.81)	(90.21)
4.1 How much gross profit is generated by each customer of Product A and Product B using ABC?
		Product A	Product B
Units purchased per customer
Gross profit (loss) per customer
4.2 Is the gross profit adequate for each customer of Product A and B using ABC?
		Product A	Product B
Gross profit (loss) per customer
Customer service cost per customer
Profit (loss) per customer
Is the profit adequate using ABC?