Fanning Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of 2018 (during which Fanning made 71,500 tennis racquets and 30,000 badminton racquets). Direct Cost Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Tennis Racquet (TR) $20.10 per unit 33.00 per unit Estimated Cost $ 725,000 359,600 152,500 693,000 $1,930,100 Badminton Racquet (BR) $13.70 per unit 27.10 per unit Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 15,800 hours; BR: 9,200 hours TR: 78 setups; BR: 46, setups TR: 3; BR: 2 TR: 30,400 hours; BR: 32,600 hours Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment. Required a. Compute the cost per unit for each product. b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
Fanning Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of 2018 (during which Fanning made 71,500 tennis racquets and 30,000 badminton racquets). Direct Cost Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Tennis Racquet (TR) $20.10 per unit 33.00 per unit Estimated Cost $ 725,000 359,600 152,500 693,000 $1,930,100 Badminton Racquet (BR) $13.70 per unit 27.10 per unit Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 15,800 hours; BR: 9,200 hours TR: 78 setups; BR: 46, setups TR: 3; BR: 2 TR: 30,400 hours; BR: 32,600 hours Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment. Required a. Compute the cost per unit for each product. b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Fanning Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make
both products even though the processes are quite different. The company has recently converted its cost accounting system to
activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of 2018
(during which Fanning made 71,500 tennis racquets and 30,000 badminton racquets).
Direct Cost
Direct materials
Direct labor
Category
Unit level.
Batch level.
Product level
Facility level.
Total
Tennis Racquet (TR)
$20.10 per unit
33.00 per unit
Estimated Cost
$ 725,000
359,600
152,500
693,000
$1,930, 100
Badminton Racquet (BR)
$13.70 per unit
27.10 per unit
Cost Driver
Number of inspection hours
Number of setups.
Number of TV commercials.
Number of machine hours
Amount of Cost Driver
TR: 15,800 hours; BR: 9,200 hours
TR: 78 setups; BR: 46 setups
TR: 3; BR: 2
TR: 30,400 hours; BR: 32,600 hours
Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected.
Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the
quarter. Facility-level cost includes depreciation of all production equipment.
Required
a. Compute the cost per unit for each product.
b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
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