12 Question 3 Belknap Manufacturing has approached you, a CGA, with a problem. The company makes two products: A12 and 115. Demand for B15 has been overwhelming; there is virtually no competition for this item and several customers have offered to pay up to $48.00 for this product, which Belknap has priced at $27.00 per unit. The prime cost of manufacture for B15 is $6.26. Fatima, the company president, is puzzled since the demand for B15 has not resulted in increased company profitability. The company's costing system assigns overhead to the products based on direct labour-hours. The following information has been made available to you: Overhead (OH) cost pools and activity levels for 2008: Rate (S) OH Cost Pool Setup Material moves Order processing Engineering Machine maintenance Activity Base Batches Material moves Number of orders Engineering hours Machine hours Planned Activity Level 30 batches 90 moves 140 orders 10,000 hours 18,000 hours Budget (S) 24,000 90.000 210,000 200,000 162,000 800 1,000 1,500 20 9 For 2008, the company anticipates a total of 27,440 direct labour-hours will be used. Planned activity for product B15, which is produced in batches of 1,000 units, are as follows: Activity Planned production Material moves Number of orders Engineering hours Machine hours Direct labour-hours Planned Activity Level 10,000 units 20 moves 50 orders 2,500 hours 6,000 hours 5,000 hours Required Write a brief memo to Fatima explaining why product B15 has not increased Belknap's profitability. Provide supporting calculations. Your memo should clearly explain why there is no apparent competition for product B15, why customers are willing to pay almost double the price per unit for this product, and what action(s) you recommend for Fatima. Your memo should be three or four paragraphs and must not exceed 350 words in length. You should perform all of the necessary calculations first and then write your memo. 12 Question 3 Belknap Manufacturing his approached you, a CGA, with a problem. The company makes two products: A12 and is. Demand for BiS has been overwhelming, there is virtually no competition for this item and several customers have offered to pay up to $48.00 for this product, which Belknap has priced at $27.00 per unit. The prime cost of manufacture for B15 is 36.26.Fatime, the company president, is puzzled since the demand for B15 has not resulted in increased company profitability. The company's costing system assigns overhead to the products based on direct labour hours. The following information has been made available to you Overhead (OH) cost pools and activity levels for 2008: OH Cost Pool Ativity Base Planned Activity Level Badget (S) Rates Setup Batches 30 batches 24,000 800 Material moves Material moves 90 moves 90,000 1.000 Order processing Number of orders 140 orders 210,000 1,500 Engineering Engineering hours 10,000 hours 200,000 20 Machine maintenance Machine hours 18,000 hours 162,000 9 For 2008, the company anticipates a total of 27,440 direct labour-hours will be used. Pleed activity for product B15, which is produced in batches of 1,000 units, are as follows: Activity Planned Activity Level Planned production 10,000 units Material moves 20moves Number of onders 50 orders Engineering hos 2.500 hours Machine hours 6,000 hours Direct labour-bours 5,000 hours Required Write a brief memoto Patima explaining why product BIS has not increased Belknap's profitability, Provide supporting calcolatices. Your memo should clearly explain why there is no apparent competition for product B15, why customers are willing to pay almost double the price per unit for this product, and what actie(s) you recommend for Fatima. Your memo should be three or four paragraphs and must not exceed 350 words in length You should perform all of the necessary cakulations first and then write your memo Note: Binak ng mas Termo