1.

Mainline Marine Company has total estimated factory overhead for the year of $1,007,100, divided into four activities: fabrication, $390,000; assembly, $229,100; setup, $144,000; and inspection, $244,000. Mainline manufactures two types of boats: a speedboat and a bass boat. The activity-base usage quantities for each product by each activity are as follows:

	Fabrication		Assembly		Setup		Inspection
Speedboat	1,000	dlh	1,700	dlh	40	setups	110	inspections
Bass boat	2,000		1,200		120		500
	3,000	dlh	2,900	dlh	160	setups	610	inspections

Each product is budgeted for 100 units of production for the year.

a. Determine the activity rates for each activity.

Fabrication	$ ___________per dlh
Assembly	$ ___________per dlh
Setup	$___________ per setup
Inspection	$___________ per inspection

b. Determine the factory overhead cost per unit for each product, using activity-based costing. If required, round to the nearest cent.

Speedboat	$___________
Bass boat	$___________

2.

Basic Motor Corporation uses target costing. Assume that Basic marketing personnel estimate that the competitive selling price for the QuikCar in the upcoming model year will need to be $24,800. Assume further that the QuikCar's total unit cost for the upcoming model year is estimated to be $19,200 and that Basic requires a 20% profit margin on selling price (which is equivalent to a 25% markup on total cost).

a. What price will Basic establish for the QuikCar for the upcoming model year? $___________

3.

Smart Stream Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 8,000 units of cellular phones are as follows:

Variable costs:			Fixed costs:
Direct materials	$ 87	per unit	Factory overhead	$349,300
Direct labor	40		Selling and admin. exp.	122,700
Factory overhead	26
Selling and admin. exp.	21
Total	$174	per unit

Smart Stream wants a profit equal to a 15% rate of return on invested assets of $1,018,990.

a. Determine the total costs and the total cost amount per unit for the production and sale of 8,000 units of cellular phones. Round the cost per unit to two decimal places.

Total costs	$__________
Cost amount per unit	$__________

b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones. ___________%

c. Determine the selling price of cellular phones. Round to the nearest cent. $________per phone

4.

Hercules Company produces three grades of steel: high, good, and regular grade. Each of these products (grades) has high demand in the market, and Hercules is able to sell as much as it can produce of all three. The furnace operation is a bottleneck in the process and is running at 100% of capacity. Hercules wants to improve steel operation profitability. The variable conversion cost is $16 per process hour. The fixed cost is $485,000. In addition, the cost analyst was able to determine the following information about the three products:

	High Grade		Good Grade		Regular Grade
Budgeted units produced	5,000		5,000		5,000
Total process hours per unit	14		12		9
Furnace hours per unit	3		4		5
Unit selling price	$353		$310		$292
Direct materials cost per unit	$114		$106		$98

The furnace operation is part of the total process for each of these three products. Thus, for example, 3 of the 14 hours required to process High Grade steel are associated with the furnace.

1. Determine the unit contribution margin for each product. If required, round your answers to two decimal places.

	Contribution Margin Per Unit
High Grade	$____________
Good Grade	$____________
Regular Grade	$____________

2. Provide an analysis to determine the relative product profitability, assuming that the furnace is a bottleneck.

	Contribution Margin Per Furnace Hour
High Grade	$___________
Good Grade	$___________
Regular Grade	$___________

All part of one big problem. Thank you so much!