Question
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.
Calculate the per unit product cost for a mountain bike.
Calculate the per unit product cost for a racing bike.
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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