Need part a and part b Huber Chairs. Inc., makes two types of chairs. Model Diam
ID: 2415886 • Letter: N
Question
Need part a and part b
Huber Chairs. Inc., makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Pamela Huber, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Huber. The market price for office chairs comparable to Model Diamond is $121 and to Model Gold is $79. Compute the cost per unit for both products. (Round intermediate calculations and final answers to 2 decimal places.) Jimmy Bent, the chief engineer, told Ms. Huber that the company is currently making 147 units of Model Diamond per batch and 174 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Huber adopts his suggestion. (Round intermediate calculations and final answers to 2 decimal places.)Explanation / Answer
OVERHEAD COST ALLOCATION:
______________________________________________________________________________________
UNITS BATCH PRODUCT FACILITY TOTAL____
Cost pool $ 262,200 $980,000 $ 420,000 $450,000 $ 2,112,200
Cost Driver No. of units Set up Commercial Machine hours
46,000 280 21 5000
Bae Rate $ 5.7 $ 3,500 $20,000 $ 9________________
ALLOCATION FOR MODEL DIAMOND:
_________________________________________________________________________________________
UNIT BATCH PRODUCT FACILITY TOTAL
Weitht 15,000 102 6 2000 __________
x Rate ($) 5.7 3,500 20,000 9________________
Allocation $85,500 $357,000 $ 120,000 $ 18,000__ 580,500 __
No. of units 15,000 15,000 15,000 15,000_____________
Coat per unit ($) 5.7 23.8 8 1.2_____ _38.7 ____
ALLOCATION FOR MODEL GOLD:
_________________________________________________________________________________________
UNITS BATCH PRODUCT FACILIITY TOTAL___
Weight 31,000 178 15 3,000
x Rate ($) 5.7 3,500 20,000 9
Allocation ($) 176,700 623,000 300,000 27,000 1,126,700
No of Units 31,000 31,000 31,000 31,000
Cost per unit ($) 5.7 20.10 9.68 0.87 36.35
COST PER UNIT COMPUTATION:
_________________________________________________________________________________________
Type of product Direct Material + Direct labour + Allocation Overhead= Total
Model Diamand ($) 20.6 + 37.4 + 38.70 = 96.70
Model Gold ($) 10.8 + 18.7 + 36.35 = 65.85
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