ABC Versus ABM Whitaker Company produces two models of blenders for restaurants the Super Model Cariced at $402) and the Special Model prices $205). Recent with has been losing market share with its Special Model because of competitors offering blenders with the same quality and tracures but we can study revealed that Whitaker could reduce the price of its Special Model to $185, it would regain its former share of the mat. Management, howed that any price reduction must be accompanied by a cost reduction of the same amount to that per un profit is not edited, James Davis, many co has indicated that poor overhead costing assignments may be distorting management's view of each producer's cout and therefore, they toow how prices, James has entified the following overhead activities machining, inspection and rework. The three activities, the costs, and practice follows: Activity Cost Practical Capacity Machining $5,697,000 91,900 machine hours Inspection 3.499,700 44,300 inspection hours Rework 1,756.000 43,900 rework hours The consumption patterns of the two products are as follows: Special Super Units 100.000 32,200 Machine hours 51.600 40.100 Inspection hours 10,100 34.200 Rework hours 7.500 36,400 Whitaker assigns overhead costs to the two products using a wide rate based on machine hours Required: 1. Calculate the unit overhead cost of the Special Modeling machine hours to sign overhead costs, Round intermediate calculations and you to Required: 1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round Intermediate calculations and your fingewers the nearest cent, if rounding is required. per unit Now, repeat the calculation using Abc to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, W reunding de required. per unit Did improving the accuracy of cost assignments solve Whitaker's competitive problem? 2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Whitaker has found a new supplier that provides higher quality components such that inspection and rew costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent Anc The relative consumption patterns also remain the same. Round Intermediate calculations and your final answer to the nearest cant, freunding is required per unit Comment on the difference between ABC and ABM 3. In Requirements 1 and 2, identify which of the data analytic types apply (descriptive, diagnostic, predictive and prescriptive) See 2.500 237, for a brief review of data analytic types Por restaurants: the "Super Model (priced at $402) and the Special Model (priced at $205 recently. We has been losing market share with its Special Model because of competitors offering blenders with the same quality and features but at a lower DEAC study revealed that if Whitaker could reduce the price of its Special Model to $185, it would regain its former share of the market Management, hovec that any price reduction must be accompanied by a cost reduction of the same amount so that per unit profitability is not affected. James Davis, como controle has indicated that poor overhead costing assignments may be distorting management's view of each product's cost and therefore, the ability to know to set prices. James has identified the following overhead activities: machining, inspection, and rework. The three activities, the costs, and practical capaces are as follows: Activity Cost Practical Capacity Machining $5,697,800 91,900 machine hours Inspection 3,499,700 44,300 inspection hours Rework 1,756,000 43,900 rework hours The consumption patterns of the two products are as follows: Special Super Units 32,200 100,000 51,800 Machine hours 40,100 Inspection hours 10,100 34,200 Rework hours 7,500 36,400 Whitaker assigns overhead costs to the two products using a plantwide rate based on machine hours 1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and anal answer to the nearest cent, If rounding is required. per unit Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, it rounding is required. per unit Did improving the accuracy of cost assignments solve Whitaker's competitive problem? 2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root case of be Inspection and rework activities. Suppose further that Whitaker has found a new supplier that provides higher quality components such that inspection and costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rewark times are also reduced by 50 percent) AC The relative consumption patterns also remain the same. Round Intermediate calculations and your final answer to the nearest cent, rounding is required per unit Comment on the difference between ABC and ABM. 3. In Requirements 1 and 2, Identify which of the data analytic types apply (descriptive diagnostic, predictive, and prescriptive). See hits 2.5 and 2.6.370 for a brief review of data analytic types
