Thornton Cameras, Incorporated manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Thornton uses an activity-based costing system. The following are the relevant cost data for the previous month: Direct Cost per Unit Direct materials Direct labor Model ZM $ 20.50 29.00 Model DS $ 9.00 11.00 Category Unit level Batch level Estimated Cost Cost Driver $ 24,990 Product level Facility level Total 45,120 88,750 228,000 Number of units Number of setups Number of TV commercials Number of machine hours $ 386,860 Amount of Cost Driver ZM: 2,450 units; DS: 9,450 units ZM: 24 setups; DS: 24 setups ZM: 16; DS: 9 ZM: 400 hours; DS: 800 hours Thornton's facility has the capacity to operate 3,600 machine hours per month. Required a. Compute the cost per unit for each product. b. The current market price for products comparable to Model ZM is $126 and for DS is $90. If Thornton sold all of its products at the market prices, what was its profit or loss for the previous month? c. A market expert believes that Thornton can sell as many cameras as it can produce by pricing Model ZM at $121 and Model DS at $39. Thornton would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is the target cost for each product?
Thornton Cameras, Incorporated manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Thornton uses an activity-based costing system. The following are the relevant cost data for the previous month: Direct Cost per Unit Direct materials Direct labor Model ZM $ 20.50 29.00 Model DS $ 9.00 11.00 Category Unit level Batch level Estimated Cost Cost Driver $ 24,990 Product level Facility level Total 45,120 88,750 228,000 Number of units Number of setups Number of TV commercials Number of machine hours $ 386,860 Amount of Cost Driver ZM: 2,450 units; DS: 9,450 units ZM: 24 setups; DS: 24 setups ZM: 16; DS: 9 ZM: 400 hours; DS: 800 hours Thornton's facility has the capacity to operate 3,600 machine hours per month. Required a. Compute the cost per unit for each product. b. The current market price for products comparable to Model ZM is $126 and for DS is $90. If Thornton sold all of its products at the market prices, what was its profit or loss for the previous month? c. A market expert believes that Thornton can sell as many cameras as it can produce by pricing Model ZM at $121 and Model DS at $39. Thornton would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is the target cost for each product?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:Thornton Cameras, Incorporated manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens.
Thornton uses an activity-based costing system. The following are the relevant cost data for the previous month:
Direct Cost per Unit
Direct materials
Direct labor
Model ZM
$ 20.50
29.00
Model DS
$ 9.00
11.00
Category
Unit level
Batch level.
Product level
Facility level
Total
Estimated
Cost
Cost Driver
$ 24,990
Number of units
45,120
Number of setups
88,750
228,000
Number of TV commercials
Number of machine hours
$ 386,860
Amount of Cost Driver
ZM: 2,450 units; DS: 9,450 units
ZM: 24 setups; DS: 24 setups
ZM: 16; DS: 9
ZM: 400 hours; DS: 800 hours
Thornton's facility has the capacity to operate 3,600 machine hours per month.
Required
a. Compute the cost per unit for each product.
b. The current market price for products comparable to Model ZM is $126 and for DS is $90. If Thornton sold all of its products at the
market prices, what was its profit or loss for the previous month?
c. A market expert believes that Thornton can sell as many cameras as it can produce by pricing Model ZM at $121 and Model DS at
$39. Thornton would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is
the target cost for each product?
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