Jordan 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 Jordan made 69,500 tennis racquets and 29,600 badminton racquets). Tennis Racquet (TR) $18.10 per unit 34.50 per unit Badminton Racquet (BR) $14.10 per unit 24.50 per unit Direct Cost Direct materials Direct labor Estimated Cost Amount of Cost Driver Category Unit level Cost Driver $ 930,000 312,000 157,500 Number of inspection hours Number of setups TR: 14,700 hours; BR: 15,300 hours Batch level TR: 79 setups; BR: 51 setups TR: 4; BR: 1 TR: 31,400 hours; BR: 32,600 hours Product level Number of TV commercials 576,000 $1,975,500 Facility level Number of machine hours Total 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?
Jordan 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 Jordan made 69,500 tennis racquets and 29,600 badminton racquets). Tennis Racquet (TR) $18.10 per unit 34.50 per unit Badminton Racquet (BR) $14.10 per unit 24.50 per unit Direct Cost Direct materials Direct labor Estimated Cost Amount of Cost Driver Category Unit level Cost Driver $ 930,000 312,000 157,500 Number of inspection hours Number of setups TR: 14,700 hours; BR: 15,300 hours Batch level TR: 79 setups; BR: 51 setups TR: 4; BR: 1 TR: 31,400 hours; BR: 32,600 hours Product level Number of TV commercials 576,000 $1,975,500 Facility level Number of machine hours Total 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?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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