Problem T5-9 (Part Level Submission)

After attending a seminar on measuring customer profitability, Mason Ford decided to examine Olson Optics customers to determine if the company truly knew how profitable its customers were. Olson Optics already uses an activity-based costing system to determine the product cost of its two products: RF30 and LF45. Each RF30 sells for $15.00 and requires $7.05 in direct materials and $4.00 in direct labor. Each LF45 sells for $50.00 and requires $15.45 in direct materials and $14.00 in direct labor. The following table provides cost and activity information for manufacturing overhead for the two products.

								Number of Activities
Activity Cost Pool		Cost Driver		Manufacturing Overhead Costs				RF30		LF45		Total
Packing		Cartons			$200,000			500,000		300,000		800,000
Setup		Setup hours			450,000			10,000		27,500		37,500
Assembly		Spot welds			730,000			125,000		240,000		365,000
Finishing		Machine hours			300,000			25,000		75,000		100,000
Total manufacturing overhead costs					$1,680,000
Units produced								600,000		200,000

Based on what Ford learned at the seminar, he has gathered the following information about customer support activities.

Activity Cost Pool		Cost Driver		Selling Costs		Driver Volume
Order entry		Orders		$200,000		40,000
Customer support		Support hours		150,000		5,000
Sales calls		Sales calls		250,000		2,000
Express shipping		Shipments		140,000		7,000
Total selling costs				$740,000

Ford wants to apply his new profitability analysis techniques to Infrared Technologies, a company he believes is representative of Olsons average customer. Information about Infrareds account activity is as follows.

RF30 purchases		10,000	units
LF45 purchases		3,000	units
Orders placed		300
Customer support		500	hours
Sales calls		24
Express shipments		250

(a)

Calculate the activity-based product cost for RF30 and LF45. (Round answers to 2 decimal places, e.g. 15.25.)

		RF30		LF45
Total unit cost		$		$