Jordan Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom len
ID: 2559100 • Letter: J
Question
Jordan Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Jordan uses an activity-based costing system. The following are the relevant cost data for the previous month: Direct Cost per Unit Model M Model DS Direct materials Direct labor $20.7 29.4 $7.0 9.0 Cost Driver Use of Cost Driver ategory Unit level Batch level Product level Facility level180,000Number of machine hours Estimated Cost 25,960 49,920 90,000 Number of units Number of setups Number of TV comnercials zM: 2,500 units: DS: 9,300 units 2M: 26 setups; DS: 26 setups ZM: 14 DS: 11 ZM: 300 hours: DS: 600 hours $345,880 Total Jordan's facility has the capacity to operate 2.700 machine hours per month. Required a. Compute the cost per unit for each product. rent market price for products comparable to Model ZM is $118 and for DS is $68. f Jordan 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 Jordan can sell as many cameras as it can produce by pricing Mode ZM at $113 and M odel DS at $34. Jordan would like to use those estimates as its target prices and have a profit margin of 30 percent of target target cost for each product?Explanation / Answer
Answer
Model ZM
Model DS
Direct material
$ 20.70
$ 7.00
Direct labor
$ 29.40
$ 9.00
Total Cost per unit
$ 50.10
$ 16.00
Units
2500
9300
Total variable cost
$ 1,25,250.00
$ 1,48,800.00
Add: Overhead allocation as per ABC
Unit Level
$ 5,500.00
$ 20,460.00
Batch Level
$ 24,960.00
$ 24,960.00
Product Level
$ 50,400.00
$ 39,600.00
Facility Level
$ 60,000.00
$ 1,20,000.00
Total Cost
$ 2,66,110.00
$ 3,53,820.00
Units
2500
9300
Cost Per Unit
$ 106.44
$ 38.05
Model ZM
Model DS
Market price per unit
$ 118.00
$ 68.00
(-) Cost per unit as calculated above
$ 106.44
$ 38.05
Profit per unit
$ 11.56
$ 29.95
Total profits [Units x Profit per unit]
$ 28,900.00
$ 2,78,535.00
Model ZM
Model DS
target Sale Price
$113
$34
(-) Margin 30%
$33.9
$10.2
Target Cost per unit
$79.1
$23.8
Model ZM
Model DS
Direct material
$ 20.70
$ 7.00
Direct labor
$ 29.40
$ 9.00
Total Cost per unit
$ 50.10
$ 16.00
Units
2500
9300
Total variable cost
$ 1,25,250.00
$ 1,48,800.00
Add: Overhead allocation as per ABC
Unit Level
$ 5,500.00
$ 20,460.00
Batch Level
$ 24,960.00
$ 24,960.00
Product Level
$ 50,400.00
$ 39,600.00
Facility Level
$ 60,000.00
$ 1,20,000.00
Total Cost
$ 2,66,110.00
$ 3,53,820.00
Units
2500
9300
Cost Per Unit
$ 106.44
$ 38.05
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