Kerston Cameras, Inc., manufactures two models of cameras. Model ZM has a zoom l
ID: 2415884 • Letter: K
Question
Kerston Cameras, Inc., manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Kerston uses an activity-based costing system. The following are the relevant cost data for the previous month. Kerston's facility has the capacity to operate 4,500 machine hours per month. Compute the cost per unit for each product. (Round intermediate calculations and final answers to 2 decimal places.) The current market price for products comparable to Model ZM is $129 and for DS is S45. If Kerston sold all of its products at the market prices, what was its profit or loss for the previous month? (Round intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.)Explanation / Answer
Answer a. Activity Cost Pool Estimated Overhead Expected use of Cost Drivers Activity-Based Overhead rate Unit level 24000 12000 2.00 per Unit Batch Level 45000 50 900.00 per setup Product Level 87500 25 3,500.00 per TV Commercials Facility level 270000 1500 180.00 Per Machine hr. Total Overhead 426500 Alocation of Overhead Cost Under ABC Particulars Model Total ZM DS Unit level 4,800 19,200 24000 Batch Level 22,500 22,500 45000 Product Level 52,500 35,000 87500 Facility level 90,000 180,000 270000 Total 169,800 256,700 426,500 No. of Units 2400 9600 Overhead Cost per Unit 70.75 26.74 Calculation of Total Cost Under ABC Model ZM DS Direct Material 20.10 10.10 Direct labor 28.20 12.20 Overhead 70.75 26.74 Total Unit Cost 119.05 49.04 Answer b. Calculation of Profit / (Loss) Model ZM DS SP Per Unit 129.00 45.00 Less: Cost per Unit 119.05 49.04 Profit / (loss) 9.95 (4.04)
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