Vargo Company makes two distinct products with the following information available for each.
| Standard | Deluxe |
Direct materials | $4 per unit | $8 per unit |
Direct labor hours | 4 DLH per unit | 5 DLH per unit |
Machine hours | 3 MH per unit | 3 MH per unit |
Batches | 175 batches | 75 batches |
Volume | 40,000 units | 10,000 units |
Engineering modifications | 50 modifications | 25 modifications |
Number of customers | 1,000 customers | 1,000 customers |
Market price | $92 per unit | $125 per unit |
The company’s direct labor rate is $20 per direct labor hour (DLH). Additional information follows.
| Costs | Driver |
Indirect manufacturing |
|
|
Engineering support | $ 56,250 | Engineering modifications |
Electricity | 112,500 | Machine hours |
Setup costs | 41,250 | Batches |
Nonmanufacturing |
|
|
Customer service | 250,000 | Number of customers |
Required
1. Compute the manufacturing cost per unit using the plantwide overhead rate based on machine hours. What is the gross profit per unit?
2. How much gross profit is generated by each customer of the standard product using the plantwide overhead rate? How much gross profit is generated by each customer of the deluxe product using the plantwide overhead rate? What is the cost of providing customer service to each customer? What information is provided by this comparison?
3. Determine the manufacturing cost per unit of each product line using ABC. What is the gross profit per unit?
4. How much gross profit is generated by each customer of the standard product using ABC? How much gross profit is generated by each customer of the deluxe product using ABC? Is the gross profit per customer adequate?
5. Which method of product costing gives better information to managers of this company? Explain.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.