Question

Benson Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of 2018 (during which Benson made 70,500 tennis racquets and 29,200 badminton racquets). Direct Cost Direct materials Direct labor Tennis Racquet (TR) $17.60 per unit 31.00 per unit Badminton Racquet (BR) $14.30 per unit 25.30 per unit Category Unit level Batch level Product level Facility level Total Estimated cost $ 754,000 351,000 140,000 536,000 $1,781,000 Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 14,800 hours; BR: 11,200 hours TR: 76 setups; BR: 54 setups TR: 4; BR: 1 TR: 30,800 hours; BR: 36,200 hours Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment.

Answer 1

Question 1

Calculation of Unit Product Cost

Particulars	Tennis	Badminton
Direct Materials	17.60	14.30
Direct Labour	31	25.30
Overhead Costs	14.08	27
Unit Product Cost	62.68	66.60

Note

There is Normal Rounding off being done to final answers obtained for Overhead Cost as they were in multiple fractions.If you want exact figures please check the supporting Work and you can get the actual figures.

Supporting Work

	A	B	C=A/B
Particulars	Estimated Cost	Total Amount of Cost Driver	Activity Allocation Rate
Unit Level	754,000	26,000	29	Per Inspection Hour
Batch Level	351,000	130	2,700	Per setup
Product Level	140,000	5	28,000	Per Commercial
Facility Level	536,000	67,000	8	Per Machine Hour
Total Overhead	1,781,000

Note

Total Amount of Cost Driver = Cost Driver for Tennis + Cost Driver for Badminton

For Tennis Racquet

Total Amount = Activity Allocation Rate * Total Amount of Cost Driver for Respective Product

Particulars	Activity Allocation Rate	Total Amount of Cost Driver for Tennis	Total Amount
Unit Level	29	14,800	429,200
Batch Level	2,700	76	205,200
Product Level	28,000	4	112,000
Facility Level	8	30,800	246,400
Total Manufacturing Overheads			992,800
÷ Number of Units Produced			70,500
Overhead Cost per Unit			14.08

For Badmash Racquet

Particulars	Activity Allocation Rate	Total Amount of Cost Driver for Tennis	Total Amount
Unit Level	29	11,200	324,800
Batch Level	2,700	54	145,800
Product Level	28,000	1	28,000
Facility Level	8	36,200	289,600
Total Manufacturing Overheads			788,200
÷ Number of Units Produced			29,200
Overhead Cost per Unit			27

Question 2

Cost Price of Badminton = $ 66.60

Margin of 30% on Cost = 30% of 66.60 = $ 19.98

Sale Price of Badminton = 66.60 + 19.98

Sale Price of Badminton = $ 86.58 per Badminton Racquet

Additional Information

Overhead Cost for Tennis Reacquet = $ 14.0822695 per Unit of Tennis Racquet

Overhead Cost for Badminton Racquet =$ 26.9931507 per Unit of Badminton Racquet