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:
Customer AAA BBB
Component Type A999 B999
Contract Value ($) $27,000 $100,000
Contract Quantity 1,000 unit 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
I need help with:
a. Calculate the activity-based costs and profits for each contract.
Please provide showing of the work so I can understand.
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