Question
Baird Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Baird uses an activity-based costing
Baird Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Baird uses an activity-based costing system. The following are the relevant cost data for the previous month:
Direct Cost per Unit | Model ZM | Model DS | ||||
Direct materials | $ | 20.00 | $ | 7.00 | ||
Direct labor | 28.00 | 9.00 | ||||
Category | Estimated Cost | Cost Driver | Use of Cost Driver | ||||
Unit level | $ | 25,960 | Number of units | ZM: 2,400 units; DS: 9,400 units | |||
Batch level | 52,000 | Number of setups | ZM: 26 setups; DS: 26 setups | ||||
Product level | 90,000 | Number of TV commercials | ZM: 15; DS: 10 | ||||
Facility level | 180,000 | Number of machine hours | ZM: 300 hours; DS: 600 hours | ||||
Total | $ | 347,960 | |||||
Bairds facility has the capacity to operate 2,700 machine hours per month.
Required
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Compute the cost per unit for each product.
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The current market price for products comparable to Model ZM is $118 and for DS is $77. If Baird sold all of its products at the market prices, what was its profit or loss for the previous month?
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A market expert believes that Baird can sell as many cameras as it can produce by pricing Model ZM at $113 and Model DS at $34. Baird 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?
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