"A dollar of gross margin per briefcase? That's ridiculous roared Art Dejans, president of Carryall, Inc. Why do we go on producing those standard briefcases when we're able to make over $17.00 per unit on our specialty items? Maybe it's time to get out of the standard line and focus the whole plant on specially work." Defans is referring to a summary of average unit costs and revenues that he had just received from the company's accounting department Selling price per unit Unit product cost Gross margin per unit Standard Briefcases $ 40,00 37.00 3,00 Specialty Briefcases $ 56.00 33.50 22.50 CarryAll produces briefcases from leather, fabric, and synthetic materials in a single plant. The basic product is a standard briefcase made from leather lined with fabric. The standard briefcase is a high-quality item and has sold well for many years. Last year, the company decided to expand its product line and produce specialty briefcases for special orders. These briefcases differ from the standard in that they vary in size, contain the finest synthetic materials, and have the buyer's name embossed on them. To reduce labour costs on the specialty briefcases, most of the cutting and stitching is done by automated machines. These machines are used to a much lesser degree in the production of standard briefcases. "I agree that the specialty business is looking better and better, replied Sally Henne, the company's marketing manager "And there seems to be plenty of specialty work out there, particularly since the competition hasn't been able to touch our price Did you know that Armour Company, our biggest competitor, charges over $7100 a unit for its specialty torna? Now that's what I call gouging the customer A breakdown of the manufacturing cost for each of Carryal's product lines follows: Standard Specialty Briefcases Briefcases Units produced each month 13.200 2,950 Direct materials Leather 1.0 m $ 17.00 0.5 m? $ 8:50 Fabric 1.0 m2 7.70 10 m 7.70 Synthetic 7 70 Total materials 24.70 23.90 Direct labour 0.5 h @ $11.50 5.75 0.5 h @ $11,50 5.75 Manufacturing overhead 0.5 h @ $20 00 10.00 0.5 h $20.00 10.00 Unit product cost $ 40.45 $ 39.65 $ Manufacturing overhead is applied to products on the basis of direct labour-hours. The rate of $20 per direct labour-hour is determined by dividing the total manufacturing overhead cost for a month by the direct labour-hours: Manufacturing overhead cost, $150,793 $20 per DLH Direct labour-hours, 7,540 212 TORE und mes Art sandra Achomwa Theory wang dhe to the como 1 wd ROM Dement Social IN Phon DNE TE UL & PIN bor end Cela 1 0 + Becky 8 9 11 VEI PA IN NA PO 2. Seper TE Berberi produced by Dr. USER - o 7 8 o "A dollar of gross margin per briefcase? That's ridiculous roared Art Dejans, president of Carryall, Inc. Why do we go on producing those standard briefcases when we're able to make over $17.00 per unit on our specialty items? Maybe it's time to get out of the standard line and focus the whole plant on specially work." Defans is referring to a summary of average unit costs and revenues that he had just received from the company's accounting department Selling price per unit Unit product cost Gross margin per unit Standard Briefcases $ 40,00 37.00 3,00 Specialty Briefcases $ 56.00 33.50 22.50 CarryAll produces briefcases from leather, fabric, and synthetic materials in a single plant. The basic product is a standard briefcase made from leather lined with fabric. The standard briefcase is a high-quality item and has sold well for many years. Last year, the company decided to expand its product line and produce specialty briefcases for special orders. These briefcases differ from the standard in that they vary in size, contain the finest synthetic materials, and have the buyer's name embossed on them. To reduce labour costs on the specialty briefcases, most of the cutting and stitching is done by automated machines. These machines are used to a much lesser degree in the production of standard briefcases. "I agree that the specialty business is looking better and better, replied Sally Henne, the company's marketing manager "And there seems to be plenty of specialty work out there, particularly since the competition hasn't been able to touch our price Did you know that Armour Company, our biggest competitor, charges over $7100 a unit for its specialty torna? Now that's what I call gouging the customer A breakdown of the manufacturing cost for each of Carryal's product lines follows: Standard Specialty Briefcases Briefcases Units produced each month 13.200 2,950 Direct materials Leather 1.0 m $ 17.00 0.5 m? $ 8:50 Fabric 1.0 m2 7.70 10 m 7.70 Synthetic 7 70 Total materials 24.70 23.90 Direct labour 0.5 h @ $11.50 5.75 0.5 h @ $11,50 5.75 Manufacturing overhead 0.5 h @ $20 00 10.00 0.5 h $20.00 10.00 Unit product cost $ 40.45 $ 39.65 $ Manufacturing overhead is applied to products on the basis of direct labour-hours. The rate of $20 per direct labour-hour is determined by dividing the total manufacturing overhead cost for a month by the direct labour-hours: Manufacturing overhead cost, $150,793 $20 per DLH Direct labour-hours, 7,540 212 TORE und mes Art sandra Achomwa Theory wang dhe to the como 1 wd ROM Dement Social IN Phon DNE TE UL & PIN bor end Cela 1 0 + Becky 8 9 11 VEI PA IN NA PO 2. Seper TE Berberi produced by Dr. USER - o 7 8 o