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Armstrong Company produces a variety of bicycles. One of its plants produces two bicycles: a mountain model and a racing model. At the beginning of

Armstrong Company produces a variety of bicycles. One of its plants produces two bicycles: a mountain model and a racing model. At the beginning of the year, the following data were prepared for this plant:

Mountain

Racing

Quantity

250,000

125,000

Selling Price

$1,200

$1,000

Unit Prime Cost

$ 400

$ 500

In addition, the following information was provided so that overhead costs could be assigned to each product:

Activity Name

Activity Driver

Activity Cost

Racing

Mountain

Machining

Machine hours

$20,000,000

250,000

250,000

Engineering

Engineering hours

$ 8,000,000

75,000

50,000

Packing

Packing orders

$ 3,500,000

50,000

125,000

Armstrong Company uses activity-based costing to calculate product costs.

A.

Calculate the per unit product cost for a mountain bike.

B.

Calculate the per unit product cost for a racing bike.

C.

Assume Armstrong Company adds 40% to the cost of a mountain bike and 35% to the cost of a racing bike obtain the selling prices. Calculate the selling prices for a mountain bike and a racing bike.

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