A-1 Eastern Chemical Company produces three products. The operating results of the current year are:ActualPrice$382.00271.60326.00SalesProduct QuantityABC1,8589,250925Direct materialsDirect laborTotal prime costTargetPrice$ 301.00313.60218.50The firm sets the target price of each product at 150% of the product's total manufacturing cost. It appears that the firm was able to sellProduct Cat a much higher price than the target price of the product and lost money on Product B. Tom Watson, CEO, wants topromote Product C much more aggressively and phase out Product B. He believes that the information suggests that Product C hasthe greatest potential among the firm's three products because the actual selling price of Product C was almost 50% higher than thetarget price, while the firm was forced to sell Product B at a price below the target price.Both the budgeted and actual factory overhead for the current year are $847,300. The actual units sold for each product also are thesame as the budgeted units. The firm uses direct labor dollars to assign manufacturing overhead costs. The direct materials and directlabor costs per unit for each product are:Number of setupsWeight of direct materials (pounds)Waste and hazardous disposalsQuality inspectionsUtilities (machine hours)TotalProduct A$ 66.0036.00$ 182.00Difference$ 1.00The controller noticed that not all products consumed factory overhead similarly. Upon further investigation, she identified thefollowing usage of factory overhead during the year:MaterialsLaborOverhead(42.80)$ 187.50Required 1 Required 2Total costProduct B$ 130.4028.09$ 158.40Product AComplete this question by entering your answers in the tabs below.Product$ 81.0018.50$ 99.50Product A Product B362664164161463,780Product BRequired:1. Determine the manufacturing cost per unit for each of the products using the volume-based method.2. What is the least profitable and the most profitable product under both the current and the ABC systems?3. What is the new target price for each product based on 150% of the new costs under the ABC system? Compare this price with theactual selling price.518,600Required 3Determine the manufacturing cost per unit for each of the products using the volume-based method. (Round yourintermediate calculations and final answers to 2 decimal places.)Product C< Required 1Product C436646511,850TotalOverheadRequired 2 >$ 8,300283,588462,58091,08082,080$ 847,380

Activity based costing is a system of cost accounting which takes into consideration the number of…

Required: 1. Determine the manufacturing cost per unit for each of the products using the volume-based method. 2. What is the least profitable and the most profitable product under both the current and the ABC systems? 3. What is the new target price for each product based on 150% of the new costs under the ABC system? Compare this price with the actual selling price.

Required: 1. Determine the manufacturing cost per unit for each of the products using the volume-based method. 2. What is the least profitable and the most profitable product under both the current and the ABC systems? 3. What is the new target price for each product based on 150% of the new costs under the ABC system? Compare this price with the actual selling price.

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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Question

A-1

Eastern Chemical Company produces three products. The operating results of the current year are:
Actual
Price
$382.00
271.60
326.00
Sales
Product Quantity
A
B
C
1,858
9,250
925
Direct materials
Direct labor
Total prime cost
Target
Price
$ 301.00
313.60
218.50
The firm sets the target price of each product at 150% of the product's total manufacturing cost. It appears that the firm was able to sell
Product Cat a much higher price than the target price of the product and lost money on Product B. Tom Watson, CEO, wants to
promote Product C much more aggressively and phase out Product B. He believes that the information suggests that Product C has
the greatest potential among the firm's three products because the actual selling price of Product C was almost 50% higher than the
target price, while the firm was forced to sell Product B at a price below the target price.
Both the budgeted and actual factory overhead for the current year are $847,300. The actual units sold for each product also are the
same as the budgeted units. The firm uses direct labor dollars to assign manufacturing overhead costs. The direct materials and direct
labor costs per unit for each product are:
Number of setups
Weight of direct materials (pounds)
Waste and hazardous disposals
Quality inspections
Utilities (machine hours)
Total
Product A
$ 66.00
36.00
$ 182.00
Difference
$ 1.00
The controller noticed that not all products consumed factory overhead similarly. Upon further investigation, she identified the
following usage of factory overhead during the year:
Materials
Labor
Overhead
(42.80)
$ 187.50
Required 1 Required 2
Total cost
Product B
$ 130.40
28.09
$ 158.40
Product A
Complete this question by entering your answers in the tabs below.
Product
$ 81.00
18.50
$ 99.50
Product A Product B
3
6
266
416
41
61
46
3,780
Product B
Required:
1. Determine the manufacturing cost per unit for each of the products using the volume-based method.
2. What is the least profitable and the most profitable product under both the current and the ABC systems?
3. What is the new target price for each product based on 150% of the new costs under the ABC system? Compare this price with the
actual selling price.
51
8,600
Required 3
Determine the manufacturing cost per unit for each of the products using the volume-based method. (Round your
intermediate calculations and final answers to 2 decimal places.)
Product C
< Required 1
Product C
4
366
46
51
1,850
Total
Overhead
Required 2 >
$ 8,300
283,588
462,580
91,080
82,080
$ 847,380

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