Question

The following data are for the two products produced by Tadros Company. Direct materials Direct labor hours Machine hours Batches Volume Engineering modifications Number of customers Market price Product A $ 14 per unit 0.4 DLH per unit 0.3 MH per unit 115 batches 10,000 units 9 modifications 500 customers $ 35 per unit Product B 26 per unit 1.5 DLH per unit 1.1 MH per unit 230 batches 2,000 units 45 modifications 400 customers S 95 per unit The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows Costs Driver Indirect manufacturing Engineering support Electricity Setup costs Nonmanufacturing Customer service $ 26,000 Engineering modifications 26,000 Machine hours 40,000 Batches 70,000 Number of customers
Please format exactly as seen, it is a big problem and it can get confusing

Answer 1

1. Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours.
	=Total overheads/Total labor hours	13.14285714
Activity Driver	Plantwide OH rate	Total Overhead Cost		Units Produced		OH Cost per unit
4,000	13.1428571	52,571		10,000		5.257142857
3,000	13.1428571	39,429		2,000		19.71428571
			Product A		Product B
Direct Material			14		26
Direct Labor			8		30
Overhead			5.26		19.71
Cost per Unit			27.26		75.71
1.2 What is the gross profit per unit?
			Product A		Product B
Market price			35		95
Cost per Unit			27.26		75.71
Gross profit per unit			7.74		19.29
2.1 How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate?
			Product A		Product B
Gross profit per unit			7.74		19.29
Units purchased per customer			20		5
Gross profit per customer			154.8		96.45
2.2 What is the cost of providing customer service to each customer?
	77.7777778
Is the gross profit adequate for each customer of Product A and B using the plantwide overhead rate?
			Product A		Product B
Gross profit per customer			154.8		96.45
Customer service cost per customer			77.78		77.78
Profit (loss) per customer			77.02		18.67
Is the profit adequate?			Yes		Yes
3.1 Determine the manufacturing cost per unit of each product line using ABC.
Engineering Support	26,000	54	481.481481
Electricity	26,000	5,200	5
Setup	40,000	345	115.942029
Overhead Assigned	Activity Driver		Activity rate		Total Overhead Cost
Product A
Engineering support	9		481.481481		4,333
Electricity	3,000		5		15,000
Setup	115		115.942029		13,333
					$32,667
Product B
Engineering support	45		481.481481		21,667
Electricity	2,200		5		11,000
Setup	230		115.942029		26,667
					$59,333
Total manufacturing costs		Product A	Product B
Direct Materials per unit		14	26
Direct Labor per unit		8	30
Overhead per unit		3.2667	29.6665
Total manufacturing cost per unit		25.2667	85.6665
3.2 What is the gross profit per unit?
		Product A	Product B
Market price		35	95
Cost per Unit		25.2667	85.6665
Gross Profit		9.7333	9.3335
4.1 How much gross profit is generated by each customer of Product A and Product B using ABC?
		Product A	Product B
Gross profit per unit		9.7333	9.3335
Units purchased per customer		20	5
Gross profit (loss) per customer		194.666	46.6675
			Product A		Product B
Gross profit per customer			194.666		46.6675
Customer service cost per customer			77.78		77.78
Profit (loss) per customer			116.886		-31.1125
Is the profit adequate?			Yes		No