Rooney Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for...

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Rooney Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Model Diamond (D) $20.90 per unit $18.60/hour x 2.00 hours production time Model Gold (G) $9.60 per unit $18.60/hour 1.00 hour production time Category Unit level Estimated Cost $ 339, 200 1,015,000 495,eee 765, 000 $2,614, 200 Cost Driver Number of units Number of setups Number of TV commercials Number of machine hours Use of Cost Driver D: 13,000 units; G: 40,000 units D: 108 setups; G: 182 setups D: 8; G 7 Di 2,400 hours; G: 2,700 hours Batch level Product level Facility leve1 Total The market price for office chairs comparable to Model Diamond is $116 and to Model Gold is $79. Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. SIlva that the company is currently making 120 units of Model Diamond per batch and 220 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. Rooney Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Model Diamond (D) $20.90 per unit $18.60/hour x 2.00 hours production time Model Gold (G) $9.60 per unit $18.60/hour 1.00 hour production time Category Unit level Estimated Cost $ 339, 200 1,015,000 495,eee 765, 000 $2,614, 200 Cost Driver Number of units Number of setups Number of TV commercials Number of machine hours Use of Cost Driver D: 13,000 units; G: 40,000 units D: 108 setups; G: 182 setups D: 8; G 7 Di 2,400 hours; G: 2,700 hours Batch level Product level Facility leve1 Total The market price for office chairs comparable to Model Diamond is $116 and to Model Gold is $79. Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. SIlva that the company is currently making 120 units of Model Diamond per batch and 220 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion.

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