Question

Eastern Chemical Company produces three products. The operating results of the current year are: Product Sales Quantity 1.495.00 2.475.00 748.00 Target Price 305.00 317.60 222.50 Actual Price $306.00 275.60 330.00 Difference $ 1.00 42.00) $107.50 The firm sets the target price of each product at 150% of the product's total manufacturing cost. It appears that the firm was able to sell Product Cat a much higher price than the target price of the product and lost money on Product B. Tom Watson, CEO, wants to promote Product C much more aggressively and phase out Product B. He believes that the information suggests that Product C has the greatest potential among the firm's three products because the actual selling price of Product C was almost 50% higher than the target price, while the firm was forced to sell Product B at a price below the target price. Both the budgeted and actual factory overhead for the current year are $727,100. The actual units sold for each product also are the same as the budgeted units. The firm uses direct labor dollars to assign manufacturing overhead costs. The direct materials and direct labor costs per unit for each product are: Direct materials Direct labor Total prime cost Product $ 70.00 40.00 $110.00 Product $134.40 32.00 22.00 $166.40 Product C $ 85.00 14.95 $ 99.95 The controller noticed that not all products consumed factory overhead similarly. Upon further investigation, she identified the following usage of factory overhead during the year: Product Product Product c 420 270 370 50 Number of setups Weight of direct materials (pounds) waste and hazardous disposals Quality inspections Utilities machine hours) Total Total Overhead $ 7.900 164,450 373,750 95,000 86,000 $727, 100 50 2,990 9.000 1.495

Answer 1

Toral dioect laboo Cost = CHOV 1,49500) C32X7,475 ) +O4.45X948) = 59,20 +231,200 + 1,183 - $310,183 Doedelem pred ovevhedd wale - P727,100 $30,83 = 234.4-2347 Monfachroring Cod pes un sing Volove loved the doort laboo cool product A poduct B procheche Orect matedais 70 13HHO 95 Dipech labot но 32 JL.45 Man fochang occhedd 93-6(H0/23 ) 74-88 (2272340) 3448044523 Total 005 2H1.28 1 134.43 9. least pofflable and the most poortable parler 09 ACHury Love herd Ama Acupty Number of serups a le 7,400 13 setups 607-69 les setup weight of debat materials 164,450 1060 Bip 155.14 per perd undle and hazardous pepesi 323,750 Go SS 2,335-9H powdepool Gualty Shopections 95,000 160 93.75 grs hopection LOf Pllues 86.000 13,4556-38 10 mochthe Coot allocated to polders endes ALC: Actity aed lacche OeCocoot calcola Corolla 10A to eat foc cold toc Number of setups 607-64 1823 3,646 2431 are maht of direct walls 155-14 60,159 H1.888 57,403 angle and hozorom Bosal 235594 los,17 151,836 116,797 accofty AngecHong 54315 29.688 32,656 | 32.656 che 6-38 19,064 51.90779534 Overhead Costa Alcocaled to each paduc using AB padech ponduce padech 70401 Qeshead costs 220,856 287.423 218.821 See ariamh 1HOS 7,495 7H8 Ovoghead Cestpescat 147.73 38.45 242.54 Mafacfuorg Cost per writing ABC Dopdecta procerib portall DPoectmate dous 70 134.00 Droed laboo HO 32 14.45 Marachoitig verhed 147.73 38 16 292-54 107000 COOL 25773 204.85 392-19 padech a Pooded B Portoric Achne pofce 295-60330 Cooromg Food forro System 2036 201-22 134.93 POORE 102-4 1 34-32 195-07 The most poor Plable product under the Current system > pedecta while the least pooktable es podent B. potchoch a pooddeat-B powdoncc 306 275.60 Acha pofce 330 27.73 204.85 392.49 Costcoprg AGC sblem Proft 48.29 70.75 (62.49) The most podplable poudech and the Auc- sysler pouzdoch chile at least poortable po poboact C 3 New target pofte ponducta Pordeact 6 poucoch SS 134-40 Dioect mateofals 70 32 цо Oftech labor 14.95 149.73 38.45 Mitochong overhead 292.54 204.85 392.49 "Total GOSH Taoger pdice 386-6 (2732. 207-28(2945 598.74(312 275-60 Achine selling pico 306 257-7

Toral dioect laboo Cost = CHOV 1,49500) C32X7,475 ) +O4.45X948) = 59,20 +231,200 + 1,183 - $310,183 Doedelem pred ovevhedd wale - P727,100 $30,83 = 234.4-2347 Monfachroring Cod pes un sing Volove loved the doort laboo cool product A poduct B procheche Orect matedais 70 13HHO 95 Dipech labot но 32 JL.45 Man fochang occhedd 93-6(H0/23 ) 74-88 (2272340) 3448044523 Total 005 2H1.28 1 134.43 9. least pofflable and the most poortable parler 09 ACHury Love herd Ama Acupty Number of serups a le 7,400 13 setups 607-69 les setup weight of debat materials 164,450 1060 Bip 155.14 per perd undle and hazardous pepesi 323,750 Go SS 2,335-9H powdepool Gualty Shopections 95,000 160 93.75 grs hopection LOf Pllues 86.000 13,4556-38 10 mochthe Coot allocated to polders endes ALC: Actity aed lacche OeCocoot calcola Corolla 10A to eat foc cold toc Number of setups 607-64 1823 3,646 2431 are maht of direct walls 155-14 60,159 H1.888 57,403 angle and hozorom Bosal 235594 los,17 151,836 116,797 accofty AngecHong 54315 29.688 32,656 | 32.656 che 6-38 19,064 51.90779534 Overhead Costa Alcocaled to each paduc using AB padech ponduce padech 70401 Qeshead costs 220,856 287.423 218.821 See ariamh 1HOS 7,495 7H8 Ovoghead Cestpescat 147.73 38.45 242.54 Mafacfuorg Cost per writing ABC Dopdecta procerib portall DPoectmate dous 70 134.00 Droed laboo HO 32 14.45 Marachoitig verhed 147.73 38 16 292-54 107000 COOL 25773 204.85 392-19 padech a Pooded B Portoric Achne pofce 295-60330 Cooromg Food forro System 2036 201-22 134.93 POORE 102-4 1 34-32 195-07 The most poor Plable product under the Current system > pedecta while the least pooktable es podent B. potchoch a pooddeat-B powdoncc 306 275.60 Acha pofce 330 27.73 204.85 392.49 Costcoprg AGC sblem Proft 48.29 70.75 (62.49) The most podplable poudech and the Auc- sysler pouzdoch chile at least poortable po poboact C 3 New target pofte ponducta Pordeact 6 poucoch SS 134-40 Dioect mateofals 70 32 цо Oftech labor 14.95 149.73 38.45 Mitochong overhead 292.54 204.85 392.49 "Total GOSH Taoger pdice 386-6 (2732. 207-28(2945 598.74(312 275-60 Achine selling pico 306 257-7

TOlacos Madlenar 638 pomochine A Toral dioect laboo Cost = CHOY 1,495.00)+(32x75 (0) +04.45X948) - 54,800+ 2.31,200 + 1,183 = $310,183 Due deleom Pred oveo hedd wale = 1727,100 $30,83 = 236.4-2347 Manifacturing Cool per unit using volume based mettere dheech laboo coot I paducha paduct B product OP: moledat 70 13WHO 95 Dipech laboro HO 14.45 man fachoing conhecd 43-6CHOM37) 74-88 (32x2346) 34.980445x236) 203.6 241-28 9. least proof table and the moor pro Prable product over het Amants AC Huy Member of serps 7/900 13 cups 607-692 setup weight of diret maleol 164,450 1060 1 55-14 peo pound Gasle and hazardous disposal 373, 750 160 2,335-44 per dipol Quarty hopections 95.000 160 peops 593-75 per Ropection | UPPHES 86.000 13,49gether coot allocated to ponderci codes Acc: ACHATY BRUocent der COEL vale cocha cca d oor looptatago led toc sta Member of setups 607-641823 1023 3,646 243) weight of direct works 155-14 65,159 H1,888 57,403 angle and hazardous disposals 2335-44 105,117 151,836 116,797 accofty Agrectors 159375 24,688 32,65632,656 1 UHHes G-38 19,064 57,347 9534 Ocohead Cool Allocated to each product using ABC Ipoldeci potcheche pandectc Total descad costs 220,856 2-87,423 219,821 Sao Gaantity 495 7,475 7H8 Overhead Cost pesurit 147.73 38-45292.54 Mafacturing Cost per unit using AB DoDcerca perdite potocrc1 Dppcl male dans 134.40 85 Droed labor 40 32 14.95 Marfachoning beshed 147.73 38.16 | 292-54 Total Coat 273 204-85 392.49 brudarA Pandor B Puertoric Achne pofce 306 295-60 330 Cost using foodPiero System 203.6 241-22 134.93 poolt 102.4 34-32 195-07 The most portlable paddoch under the current system predecta while the least pottable Po product B. 306 padect Alpooded B powdeche Achou potce 275.60 330 costupng ABC Setem 277.73 204.85 392.49 Proft 70-75 (62.49) The most pooptable poldect under the ABC-System A protect B cohile al least proofftable po podnect C 3 New Heroget pofte I productA I Puodech B pomoct C Direct mateofals 134 LO 85 Ooect labor 40 32 14.95 Mufactuofng overhead 14773 38.45 29254 "Total Cost 25773 204.85 392.44 Tadget police 386:6 (07.1347922307-28(20038 388.74 (342 mm Achal selling price 306 275-60 330 70