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Kallapur Company manufactures two products: KAP1, which sells for $120; and QUIN, which sells for $220. Estimated cost and production data for the current year
Kallapur Company manufactures two products: KAP1, which sells for $120; and QUIN, which sells for $220. Estimated cost and production data for the current year are as follows Direct materials cost Direct labor cost (@ $12/hr) Estimated production (units) KAP1 $ 30 $ 24 25,000 QUIN 45 $ 60 15,000 In addition, fixed manufacturing overhead is estimated to be $2,000,000 and variable overhead is estimated to equal $3 per direct labor hour. Kallapur desires a 15 percent return on sales for all of its products Required a. Calculate the target cost for both KAP1 and QUIN b-1. Estimate the total manufacturing cost per unit of each product if fixed overhead costs are assigned to products on the basis of estimated production in units b-2. Which of the products is earning the desired return? c-1. Recalculate the total manufacturing cost per unit if fixed overhead costs are assigned to products on the basis of direct labor hours c-2. Which of the products is earning the desired return? d. On the basis of the confusing results of parts b and c, Kallapur's manager decides to perform an activity analysis of fixed overhead The results of the analysis are as follows
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