After the meeting, Karen decided to collect cost data on the two models: the Deluxe model and the Econo model. She decided to track the costs for one week. At the end of the week,

she had collected the following data from the pattern department:

a$.$ There were a total of $2,500$ bows completed: $1,000$ Deluxe models and $1,500$ Econo models.

b$.$ There was no BWIP; however, there were $300$ units in EWIP: $200$ Deluxe and $100$ Econo models. Both models were $80\%$ complete with respect to conversion costs and $100\%$

complete with respect to materials.

c$.$ The pattern department experienced the following costs:

Direct materials $$114,000$

Direct labor $45,667$

d$.$ On an experimental basis, the requisition forms for materials were modified to identify the dollar value of the materials used by the Econo and Deluxe models:

Econo model $$30,000$

Deluxe model $84,000$

Required:

as the answer to the nearest cent.

s

per unit

Compute the unit cost of each handle using the separate cost information provided on materials. Round unit cost in your computations as well as the answer to the

nearest cent.

Econo model $

Deluxe model $$

per unit

Compare the uniifcosts computed in Requirements $1$ and $2.$ Is Karen justified in her belief that a pure process$-$costing relationship is not appropriate?

In the past, the marketing manager has requested more money for advertising the Econo line. Aaron has repeatedly refused to grant any increase in this product's advertising

budget because its per$-$unit profit $($selling price minus manufacturing cost$)$ is so low. Given the results in Requirements $1$ through $3,$ was Aaron justified in his position?

The profitability of the Econo line was being und

by nearly $$22,$ while that of the Deluxe line was

by over $$29$ producing an erroneous $$51$

a sound one. It is quite possible that Aaron was

in not granting the request$-$

because he was using the

cost information.