Franklin Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The companys accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Model Diamond (D) Model Gold (G) Direct materials $ 19.30 per unit $ 9.90 per unit Direct labor $ 17.40 /hour 2.00 hours production time $ 17.40 /hour 1.00 hour production time Category Estimated Cost Cost Driver Use of Cost Driver Unit level $ 243,000 Number of units D: 16,000 units; G: 29,000 units Batch level 775,000 Number of setups D: 110 setups; G: 200 setups Product level 594,000 Number of TV commercials D: 6; G: 12 Facility level 624,000 Number of machine hours D: 1,500 hours; G: 3,700 hours Total $ 2,236,000 The market price for office chairs comparable to Model Diamond is $121 and to Model Gold is $73. Required Compute the cost per unit for both products. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 145 units of Model Diamond per batch and 145 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion.

Franklin Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Model Diamond (D) $19.30 per unit $17.40/hour x 2.00 hours production time Model Gold (G) $9.90 per unit $17.40/hour x1.00 hour production time Category Unit level Batch level Product level Facility level Total Estimated Cost $ 243,000 775,000 594,000 624,000 $2,236,000 Cost Driver Number of units Number of setups Number of TV commercials Number of machine hours Use of Cost Driver D: 16,000 units; G: 29,000 units D: 110 setups; G: 200 setups D: 6; G: 12 D: 1,500 hours; G: 3,700 hours The market price for office chairs comparable to Model Diamond is $121 and to Model Gold is $73. Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 145 units of Model Diamond per batch and 145 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. (For all requirements, round intermediate calculations and final answers to 2 decimal places.) Cost per Unit Type of Product a. Model Diamond Model Gold b. Model Diamond Model Gold