Question
Jordan Cameras, Incorporated manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Jordan uses an activity-based costing
Jordan Cameras, Incorporated manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Jordan uses an activity-based costing system. The following are the relevant cost data for the previous month:
Direct Cost per Unit | Model ZM | Model DS |
---|---|---|
Direct materials | $ 20.80 | $ 10.80 |
Direct labor | 29.60 | 13.60 |
Category | Estimated Cost | Cost Driver | Amount of Cost Driver |
---|---|---|---|
Unit level | $ 24,000 | Number of units | ZM: 2,500 units; DS: 9,500 units |
Batch level | 48,500 | Number of setups | ZM: 25 setups; DS: 25 setups |
Product level | 87,500 | Number of TV commercials | ZM: 14; DS: 11 |
Facility level | 270,000 | Number of machine hours | ZM: 500 hours; DS: 1,000 hours |
Total | $ 430,000 |
Jordans facility has the capacity to operate 4,500 machine hours per month.
Required
Compute the cost per unit for each product.
The current market price for products comparable to Model ZM is $130 and for DS is $83. If Jordan sold all of its products at the market prices, what was its profit or loss for the previous month?
A market expert believes that Jordan can sell as many cameras as it can produce by pricing Model ZM at $125 and Model DS at $46. Jordan would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is the target cost for each product?
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