Comatas Inc. manufactures only two products, Medium (42-inch) and Large (63-inch) plasma screen TVs. To generate adequate profit and cover its expenses throughout the value chain, Comatas prices its TVs at 250% of manufacturing cost. The company is concerned because the Large model is facing severe pricing competition, whereas the Medium model is the lowoducts this past year follows: leader in the market. The CEO questions whether the cost numbers generated by the accounting system are correct. He has just leamed about (Click the icon to view the data.) Currently, the company applies manufacturing overtiead on the basis of clirect labour hours. The company incurred $29,020 of MOH this year and 25,200 direct labour hours (9,400 direct latxur hours making Mexium TVs and 15,600 making Large TVs). The ABC team identified three primary production activities generate MOH costs: (Click the icon to view the production activities.) Det Requirement 1. Use the company's current costing system to find the total cost of producing all Medium TVs and the total cost of producing all Large TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. Begin identifying the formula to compute the current plantwide manufacturing overhead rate, and then compute the rate. (Round your answer to the nearest cent.) Total manufacturing overhead / Total direct labour hours Plantwide overhead rate S 829,020 25.200 S 32.90 = Now use this rate to allocate the overhead to each model, and then calculate the average cost of making each unit of each model. (Round cost per unit to the nearest cent.) Manufacturing cost Medium Large Direct materials 664000 1310000 Direct labour 217000 3900001 Manufacturing overhead Total manufacturing cost 3500 4400 Number of units produced Cost per unit Medium (42-inch) Plasma TVs: Total direct material cost: $664,000 Total direct labour cost: $217,000 Production volume: 3,500 units Large (63-inch) Plasma TVs: Total direct material cost: $1,310,000 Total direct labour cost: $390,000 Production volume: 4,400 units i Requirements 1. Use the company's current costing system to find the total cost of producing all Medium TVs and the total cost of producing all Large TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. 2. Use ABC to find the total cost of producing all Medium TVs and the total cost of producing all Large TVs. What was the average cost of making each unit of each model? Round your answers to the nearest cent. 3. How much cost distortion was occurring between Comatas's two products? Calculate the cost distortion in total and on a per unit basis. Could the cost distortion explain the CEO's confusion about pricing competition? Explain
