INFORMATION ABOUT KERRY COMPANY

(NOTE: THE SAME INFORMATION SET FOR KERRY COMPANY APPLIES THROUGHOUT THIS EXAMINATION)

KERRY Company produces electric buses and pays five staff members exclusively devoted to providing three support activities. Each staff member works 200 hours per month and each is paid $20,000 per month.

The Chief Financial Officer (CFO) utilizes Original Activity Based Costing and has compiled the following information about the three activities undertaken by staff, the percentage of time devoted to each activity and the monthly estimated cost driver quantities as follows:

Activity	Time Percentage	Monthly Estimated Cost Driver Quantity
Machine Setups	40%	200 Setups
Invoice Processing	25%	150 Invoices
Line repair	35%	20 Line repairs
	100%

The CFO notes that these estimates can safely be applied for all months.

The Chief Executive Officer (CEO) is an advocate of Time-Driven Activity Based Costing (TDABC) (also knows as Time-Based ABC). The CEO has determined the unit time in hours for each type of activity as follows:

Activity	Unit Time (Hours)
Machine Setups	3
Invoice Processing	2
Line repair	2

One of the products which KERRY Company produces, Product AI, requires: 5 Setups, 10 Invoices and 2 Line repairs

QUESTION BASED ON KERRY COMPANY

Suppose the prime cost of one unit of Product AI is $3,000 while the price of Product AI is $11,300 per unit. By how much higher/lower is the unit profitability using TDABC as compared with original ABC? (Round to the nearest dollar)

Select one:

a. TDABC profit per unit is $1,933 higher

b. TDABC profit per unit is $1,567 lower

c. TDABC profit per unit is $1,567 higher

d. TDABC profit per unit is $442 higher

e. None of these answers