Question
Company XYZ has two fixed price contracts for two different clients. The company has enough capacity for both contracts but is uncertain whether they will
Company XYZ has two fixed price contracts for two different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable.
Data as follows:
CustomerAAABBBComponent TypeA999B999Contract Value ($)$27,000$100,000Contract Quantity1,000 units2,000 unitsMaterial cost/unit$15$20Molding time/batch5 hours7.5 hoursBatch size100 units50 units
Annual Budgeted overheads as follows:
ActivityCost driverCost driver
volume/year
Cost PoolMoldingMolding hours2,000$150,000InspectionBatches150
$75,000Production MgmtContracts20$125,000Required:
- Calculate the activity-based costs and profits for each contract.
There is not a word length requirement for this question; however, you must show your work.
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