Question
Bismarck Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Bismarck uses an activity-based costing
Bismarck Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Bismarck 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 | $45 | $20 |
Direct labor | 32 | 15 |
Category | Estimated Cost | Cost Driver | Use of Cost Driver |
Unit level | $ 27,000 | Number of units | ZM: 2,400 units; DS: 9,600 units |
Batch level | 50,000 | Number of setups | ZM: 25 setups; DS: 25 setups |
Product level | 90,000 | Number of TV commercials | ZM: 15; DS: 10 |
Facility level | 300,000 | Number of machine hours | ZM: 500 hours; DS: 1,000 hours |
Total | $467,000 |
Bismarcks facility has the capacity to operate 4,500 machine hours per month.
Required
Round your figures to two decimal points.
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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 $200 and for DS is $86. If Bismarck 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 Bismarck can sell as many cameras as it can produce by pricing Model ZM at $196 and Model DS at $84. Bismarck 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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Is there any way for the company to reach its target costs?
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