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Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants ( Lakeview ) produces home theatre
Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants
Lakeview produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in
the quality of the components and capability to "fill" the room with sound.
The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected
for the quarter follow:
The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing
overhead among the products. The current cost accounting system allocates manufacturing overhead to products based
on expected unit sales. Because Ferry carries no inventory, unit sales are equal to units produced. Second, there is a
concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better
understanding of possible financial implications if demand should be weaker than expected.
One of the team members points out that contribution margin is just revenues less variable costs and suggests the team use a single
allocation base, contribution margin.
f Compute profits per unit by product line based on the expected not breakeven sales by product line allocating overhead costs by
relative total contribution margins given expected sales.
Note: Round your answers to decimal places.
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