10.36 Volume and ABC allocations A world-famous photographer of wild animals and nature, Sonja Rego sells framed prints of select photographs over the Internet. Regardless of the picture bought, she offers buyers a choice in framing: a plain black frame or a fancy frame with a certificate of authenticity. Based on initial cost estimates, Sonja believes the Deluxe frames to be more profitable than the Standard frames. However, her profits have slipped every quarter even as the proportion of Deluxe frames sold has increased. She has asked for your help in figuring out what she might be doing wrong. She provides the following data: Deluxe Standard Units/year 1,000 5,000 Price per unit $350 $210 Materials ($/unit) 100 Labor ($/unit) She further informs us that her total overhead is $390,000 per year. 65 50 Required: a. Calculate the profit per unit for the Deluxe and Standard prints, if Sonja allocates overhead using labor dollars as the allocation basis. Deluxe's profit per unit Standard's profit per unit b. You find that only $156,000 of Sonja's overhead costs relates directly to labor. Of the remaining overhead costs, $136,500 corresponds to batch-level activities and $58,500 to product-level activities. uns separate batches (50 prints for Deluxe, 250 for Standard) for Deluxe and Standard pictures. The product-level costs, she believes, are equally attributable to both product lines. The remaining overhead costs are facility level costs related to the rent on her studio, hosting the Web site, and other such business-sustaining actions. Complete the following income statement for Sonja, clearly highlighting the allocation from each cost pool. (Round Profit/unit answers to 1 decimal place, e.g. 5.2.) - Deluxe Standard Total 1,000 5,000 Revenue Materials Labor Labor related overhead Batch related overhead Product related overhead Product profit Facility costs Profit Profit/unit