Adams Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Adam:s uses an activity-based costing system. The following are the relevant cost data for the previous month: Direct Cost perUnit Model ZM Direct materials Direct labor $20.9 29.8 Model DS $ 9.0 11.0 Estimated Cost $ 24,990 47,040 88,750 228,000 $388,780 Cost Driver Use of Cost Driver Category Unit level Batch level Product level Facility leve.l Number of units Number of setups Number of TV commercials Number of machine hours ZM: 2,350 units; DS: 9,550 units ZM: 24 setups; DS: 24 setups ZM: 16; DS: 9 ZM: 400 hours; DS: 800 hour Total Adams's facility has the capacity to operate 3,600 machine hours per month Required a. Compute the cost per unit for each product. b. The current market price for products comparable to Model ZM is $127 and for DS is $76. If Adams sold all of its products at the market prices, what was its profit or loss for the previous month? c. A market expert believes that Adams can sell as many cameras as it can produce by pricing Model ZM at $122 and Model DS at $39. Adams would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is the target cost for each product? Adams Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Adam:s uses an activity-based costing system. The following are the relevant cost data for the previous month: Direct Cost perUnit Model ZM Direct materials Direct labor $20.9 29.8 Model DS $ 9.0 11.0 Estimated Cost $ 24,990 47,040 88,750 228,000 $388,780 Cost Driver Use of Cost Driver Category Unit level Batch level Product level Facility leve.l Number of units Number of setups Number of TV commercials Number of machine hours ZM: 2,350 units; DS: 9,550 units ZM: 24 setups; DS: 24 setups ZM: 16; DS: 9 ZM: 400 hours; DS: 800 hour Total Adams's facility has the capacity to operate 3,600 machine hours per month Required a. Compute the cost per unit for each product. b. The current market price for products comparable to Model ZM is $127 and for DS is $76. If Adams sold all of its products at the market prices, what was its profit or loss for the previous month? c. A market expert believes that Adams can sell as many cameras as it can produce by pricing Model ZM at $122 and Model DS at $39. Adams would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is the target cost for each product
