Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture
Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome, and white faucets respectively. The following additional data apply CHROME WHITE 40,000 Projected sales in units 30,000 50,000 R UNIT data Selling price $40 $20 $30 Direct materials Direct labor Overhead cost based on direct labor hours 8 $15 S 3 $ 9 (traditional system) $12 S 3 $ 9 1000-unit batch Direct labor hours Machine hours Setup hours Inspection hours 10 25 0.5 20 30 10 1.0 20 40 25 30 Total overhead costs and activity levels for the year are estimated as follows Activity Direct labor hours Machine hours Setups Inspections erhead Activity levels 2,900 hours 2,400 hours 95 setup hours 2,700 inspection hours $465,500 $405,000 Required: a. Using the traditional system, determine the operating profit per unit for the brass style of faucet. b. Determine the activity-cost-driver rate for setup costs and inspection costs. c. Using the ABC system, for the brass style of faucet 1. 2. compute the estimated overhead costs per unit. compute the estimated operating profit per unit. d. Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started