Munoz 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 the year (during which Munoz made 68,500 tennis racquets and 29,200 badminton racquets). Direct Cost Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Estimated Cost $ 754,000 320,000 155,000 660,000 $ 1,889,000 Tennis Racquet (TR) $16.60 per unit 33.50 per unit Badminton Racquet (BR) $ 13.20 per unit 23.70 per unit Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 14,400 hours; BR: 11,600 hours TR: 77 setups; BR: 51 setups TR: 3; BR: 2 TR: 30,600 hours; BR: 35,400 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.
Munoz 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 the year (during which Munoz made 68,500 tennis racquets and 29,200 badminton racquets). Direct Cost Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Estimated Cost $ 754,000 320,000 155,000 660,000 $ 1,889,000 Tennis Racquet (TR) $16.60 per unit 33.50 per unit Badminton Racquet (BR) $ 13.20 per unit 23.70 per unit Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 14,400 hours; BR: 11,600 hours TR: 77 setups; BR: 51 setups TR: 3; BR: 2 TR: 30,600 hours; BR: 35,400 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.
Chapter1: Financial Statements And Business Decisions
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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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Transcribed Image Text:Munoz 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 the year (during which Munoz made 68,500 tennis racquets and 29,200 badminton racquets).
Direct Cost
Direct materials
Direct labor
Category
Unit level
Batch level
Product level
Facility level
Total
Estimated
Cost
$ 754,000
320,000
155,000
660,000
$
1,889,000
Required A
Tennis Racquet (TR)
$16.60 per unit
33.50 per unit
Badminton Racquet (BR)
$ 13.20 per unit
23.70 per unit
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
Required B
Cost Driver
Number of inspection hours
Number of setups
Number of TV commercials
Number of machine hours
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?
Tennis racquet
Badminton racquet
Amount of Cost Driver
TR: 14,400 hours; BR: 11,600 hours
TR: 77 setups; BR: 51 setups
TR: 3; BR: 2
TR: 30,600 hours; BR: 35,400 hours
Complete this question by entering your answers in the tabs below.
Compute the cost per unit for each product. (Round intermediate calculations and final answers to 2 decimal places.)
Type of Product
Cost per Unit
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