1. Delta Products has determined the following costs:

Order processing (per order)	$	7
Additional handling costs if order marked rush (per order)	$	12
Customer service calls (per call)	$	13
Relationship management costs (per customer per year)	$	3,600

In addition to these costs, product costs amount to 83 percent of sales. In the prior year, Delta had the following experience with one of its customers, Johnson Brands:

Sales	$54,900
Number of orders	270
Percent of orders marked rush	70%
Calls to customer service	169

For the coming year, Delta Products has told Johnson Brands that it will be switched to an activity-based pricing system or it will be dropped as a customer. In addition to regular prices, Johnson will be required to pay:

Order processing (per order)	$	7
Additional handling costs if order marked rush (per order)	$	13
Customer service calls (per call)	$	18

Calculate the profitability of the Johnson Brands account if activity is the same as in the prior year

2. Symphony Sound is designing a portable recording studio to be sold to consumers. The team developing the product includes representatives from marketing, engineering, and cost accounting. The recording studio will include sound-canceling monitor headphones, audio recording and enhancement software, several instrumental and vocal microphones, and portable folding acoustic panels. With this set of features, the team believes that a price of $4,440 will be attractive in the market place. Symphony Sound seeks to earn a per unit profit of 25 percent of selling price.

a.Calculate the target cost per unit.

b.The team has estimated that the fixed production costs associated with the product will be $1,661,600, and variable costs to produce and sell the item will be $2,710 per unit. In light of this, how many units must be produced and sold to meet the target cost per unit?

c.Suppose the company decides that only 1,780 units can be sold at a price of $4,440 and, therefore, the target cost cannot be reached. The company is considering dropping the folding acoustic panels, which add $700 of variable cost per unit. With this feature dropped, the company believes it can sell 2,800 units at $4,000 per unit. Will Symphony Sound be able to produce the item at the new target cost or less? what is the new target cost per unit and the cost per unit?