Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants (Lakeview) produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in the quality of the components and capability to "fill" the room with sound. The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected for the quarter follow: Units produced Machine-hours Direct labor-hours. Revenues Direct materials costs Direct labor costs Manufacturing overhead Operating Profit Silver 2,000 590 600 Profit per unit $ 583,600 310,000 9,600 Silver Gold Gold 1,500 2,100 1,200 $ 793,050 533,250 28,800 Platinum 500 1,050 750 $ 493,350 303,000 25,350 The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing overhead among the products. The current cost accounting system allocates manufacturing overhead to products based on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better understanding of possible financial implications if demand should be weaker than expected. Total One of the team members points out that contribution margin is just revenues less variable costs and suggests the team use a single allocation base, contribution margin. Platinum 4,000 3,740 2,550 f. Compute profits per unit by product line based on the expected (not breakeven) sales by product line allocating overhead costs by relative total contribution margins given expected sales. Note: Round your answers to 2 decimal places. $ 1,870,000 1,146,250 63,750 561,000 $ 99,000
Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants (Lakeview) produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in the quality of the components and capability to "fill" the room with sound. The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected for the quarter follow: Units produced Machine-hours Direct labor-hours. Revenues Direct materials costs Direct labor costs Manufacturing overhead Operating Profit Silver 2,000 590 600 Profit per unit $ 583,600 310,000 9,600 Silver Gold Gold 1,500 2,100 1,200 $ 793,050 533,250 28,800 Platinum 500 1,050 750 $ 493,350 303,000 25,350 The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing overhead among the products. The current cost accounting system allocates manufacturing overhead to products based on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better understanding of possible financial implications if demand should be weaker than expected. Total One of the team members points out that contribution margin is just revenues less variable costs and suggests the team use a single allocation base, contribution margin. Platinum 4,000 3,740 2,550 f. Compute profits per unit by product line based on the expected (not breakeven) sales by product line allocating overhead costs by relative total contribution margins given expected sales. Note: Round your answers to 2 decimal places. $ 1,870,000 1,146,250 63,750 561,000 $ 99,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Rahul
Transcribed Image Text:Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants
(Lakeview) produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in
the quality of the components and capability to "fill" the room with sound.
The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected
for the quarter follow:
Units produced
Machine-hours
Direct labor-hours
Revenues
Direct materials costs
Direct labor costs.
Manufacturing overhead
Operating Profit
Silver
2,000
590
600
Profit per unit
$ 583,600
310,000
9,600
Silver
Gold
Gold
1,500
2,100
1,200
$ 793,050
533,250
28,800
Platinum
500
1,050
750
$493,350
303,000
25,350
The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing
overhead among the products. The current cost accounting system allocates manufacturing overhead to products based
on expected unit sales. (Because Ferry carries no inventory, unit sales are equal to units produced.) Second, there is a
concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better
understanding of possible financial implications if demand should be weaker than expected.
Total
One of the team members points out that contribution margin is just revenues less variable costs and suggests the team use a single
allocation base, contribution margin.
Platinum
4,000
3,740
2,550
f. Compute profits per unit by product line based on the expected (not breakeven) sales by product line allocating overhead costs by
relative total contribution margins given expected sales.
Note: Round your answers to 2 decimal places.
$ 1,870,000
1,146,250
63,750
561,000
$ 99,000
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