chapter 9: activity based costing

Kima Company manufactures and sells two models of a home appliance. The Standard model is a basic appliance with mostly manual features, while the Galaxy model is highly automated. The appliances are produced to order, and there are no inventories at the end of the year.

The cost accounting system at Kima allocates overhead to products based on direct labor cost. Overhead in year 1, which just ended, was $3,345,000. Other data for year 1 for the two products follow:

	Standard Model			Galaxy Model
	(20,000 units)			(3,000 units)
Sales revenue	$	6,100,000		$	2,800,000
Direct materials		2,500,000			400,000
Direct labor		1,700,000			530,000

Required:

a. Compute product line profits/loss for the Standard model and the Galaxy model for year 1. (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign.)