Chairs Caribe manufactures two types of chairs, the Diamante Model, for high-top professionaloffices, and the Oro Model, an economical chair for middle-class families. The president of thecompany is concerned that the company had losses last quarter and the competition islowering the prices of economy chairs. It was the first time the company had a loss.The market price for the Diamond Model is $ 130 per chair. The Gold Model sells for $ 84 perchair.The company's accountant collected the following data:- Direct materials from the Diamond Model $ 27 for each chair- Direct materials from the Gold Model $ 17 for each chair- Direct labor of the Diamond Model $ 20 per hour; two hours for each chair = $ 40Direct labor of the Gold Model $ 20 per hour; one hour per chair = $ 20-The accountant classified the other manufacturing costs as follows:goldBudgetCost DriverDiamond300,000750,000Unit level# of chairs15,00035,000Batch level# of setups104146Product level450,000# of AD on TV.10Factory level500,000# of machine hrs.1,5003,500REQUIRED1. Use ABC and calculate the cost of production for each chair model. Round to two decimalplaces.2. If the other manufacturing costs had been charged to the products based on labor hours,instead of using ABC, calculate the cost that each model would have had.3. Why do you think the company made a loss last quarter?

In the given question, Chair Caribe manufactures two models of chairs. Due to costing its overheads…

Answered: Chairs Caribe manufactures two type…

Chairs Caribe manufactures two type offices, and the Oro Model, an econ« company is concerned that the com lowering the prices of economy chai TI.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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