Pricing decisions made with ABC system cost data Pittman Furniture Corporation makes two types of dining tables, Elegance for formal dining and Comfort for casual dining, at its single factory. With the economy beginning to experience a recession, Justin Pittman, the president, is concerned about whether the company can stay in business as market prices fall. At Mr. Pittman's request, Yamini Sing, the controller, prepared cost data for analysis.

Inspectors are paid according to the number of actual hours worked, determined by the number of tables inspected. Engineers, who set up equipment for both products, are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter.

Required
a. Compute the cost per unit for each product.
b. If management wants to make 30 percent of cost as a profit margin for Elegance, what price should the company set?
c. The market price of tables in the Comfort class has declined because of the recession. Management asks you to determine the minimum cost of producing Comfort tables in the short term. Provide that information.

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Direct Cost Direct materials Direct labor Category Product inspection Machine setups Product advertising Facility depreciation Total Elegance (E) $50 per unit Comfort (C) s30 per unit $36 per hour x 1 hour production time $36 per hour x 1.5 hours production time Estimated Cost Use of Cost Driver E: 2,500 units; C: 7,500 units E: 23 setups; C: 27 setups Cost Driver Number of units Number of setups Number of TV commercials Number of machine hours $120,000 E:5; C: 9 E: 5,000 hours; C: 5,000 hours 210,000 405,000 $810,000