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Canadian Motorcycle Company (CMC) produces two models of motorcycles: Faster and Slower. The company has five categories of overhead costs: purchasing, receiving, machine operating. handling,

Canadian Motorcycle Company (CMC) produces two models of motorcycles: Faster and Slower. The company has five categories of overhead costs: purchasing, receiving, machine operating. handling, and shipping. Each category represents the following percentages of total overhead costs, which amount to $7 million: Purchasing 25.0% Receiving 12.5% Machine operating 37.5% Handling 10.0% Shipping 15.0% Current capacity is 200.000 machine hours, and the current production uses 100% of the available hours. The sales mix is 45% Faster and 55% Slower. The overhead costs are applied to each model based on machine hours. The production costs for each model of motorcycle and other relevant information are as follows : Faster Slower Direct materials per unit 5000 3900 Direct labour per unit 1500 1600 Applied overhead ? Number of units produced 1000 1100 Number of purchases 6 4 number of shipments 5 5 Percentage of machine hours consumed by each product 50% 50% Number of moves in handling 50 75 Number of kilometres to ship to customers 3400 3800 CMC determines its prices by adding 50% to the cost of direct materials and direct labour. Determine if this pricing policy is approprate

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