9 Return to question Kallapur Company manufactures two products: KAP1, which sells for $120; and QUIN, which sells for $220. Estimated cost and production data for the current year are as follows. Direct materials cost nes Direct labor cost (@ $12/hr) Estimated production (units) KAP1 $ 30 QUIN $45 $ 24 25,000 $ 60 15,000 In addition, fixed manufacturing overhead is estimated to be $2,000,000 and variable overhead is estimated to equal $3 per direct abor hour. Kallapur desires a 15 percent return on sales for all of its products. Required: e. Calculate the target cast for both KAP1 and QUIN b-1. Estimate the total manufacturing cost per unit of each product if fixed overhead costs are assigned to products on the basis of estimated production in units, b-2. Which of the products is earning the desired return? -1. Recalculate the total manufacturing cost per unit if fixed overhead costs are assigned to products on the basis of direct labor hours... -2. Which of the products is earning the desired return? d. On the basis of the confusing resuits of parts b and c, Kallapur's manager decides to perform an activity analysis of fixed overhead. The results of the analysis are as follows. Activity Machine set-ups Purchase orders Machining Inspection Shipping to customers Total fixed overhead Demands Costs Driver KAP1 QUIN $ 400,000 # of set-ups 100 400 600,000 # of orders 200 100 500,000 # of machine-hours. 200,000 # of batches 2,000 6,000 50 30 300,000 $2,000,000 # of shipments 300 200 Return to questa d-1. Estimate the total manufacturing cost per unit of each product if activity-based costing is used for assigning fixed overhead costs. d-2. Under this method, which product is earning the desired return? -1. Kallapur's production manager believes that design changes would reduce the number of set-ups required for QUIN to 25. Fixed overhead costs for set-ups would remain unchanged. What will be the impact of the design changes on the manufacturing costs of both products? -2. Which of the products will earn the desired return? g-1. An alternative to the design change is to purchase a new machine that will reduce the number of set-ups for KAP1 to 20 and the number of set-ups for QUIN to 80. The machine will also reduce fixed set-up costs to $200,000 Calculate the manufacturing costs for each product if the machine is purchased. g-2. Should Kallapur purchase the new machine? Answer is not complete. Complete this question by entering your answers in the tabs below.