Company XYZ has two fixed price contracts for two different claims. The company has enough capacity for both contracts but is uncertain whether they will be profitable.

Data as follows:

Customer AAA BBB

Component Type A999 B999

Contract Value ($) $27,000 $100,000

Material cost/unit 1,000 units 2,000 units

Material cost/unit $15 $20

Molding time/batch 5 hours 7.5 hours

Batch size 100 units 50 units

Annual Budgeted overheads as follows:

Activity Cost driver Cost driver volume/year Cost Pool

Molding Molding hours 2,000 $150,000

Inspection Batches 150 $75,000

Production Mgmt Contracts 20 $125,000

Calculate the activity-based costs and profits for each contract.