Kallapur Company manufactures two products: KAPI, which sells for $120, and QUIN, which sells for $220. Estimated cost and production data for the current year are as follows. Diret materials cost Direct labor cost ( 512/hr) Estimated production (units) KAPT $ 30 $ 24 25,000 QUIN $ 45 $ 60 15,00 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 KAPI 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 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 hours Demands Activity Machine set-ups Purchase orders Machining Inspection Shipping to customers Total fixed overhead Costs $ 400,000 600,000 500,000 200,000 300,000 $2,000,000 Driver # of set-ups of orders # of machine-hours # of batches # of shipments Demands KAPI QUIN 100 480 200 100 2,000 6,000 se 3e 300 200 d-1. Estimate the total manufacturing cost per unit of each product if activity-based costing is used for assigning fixed overhead costs d-2 Under this method, which product is earning the desired return? 1-1. Kallapur's production manager believes that design changes would reduce the number of set-ups required for QUIN to 25. Fixed overhead costs for set-ups would remain unchanged What will be the impact of the design changes on the manufacturing costs of both products? 1-2. Which of the products will earn the desired return? g-1. An alternative to the design change is to purchase a new machine that will reduce the number of set-ups for KAP1 to 20 and the number of set-ups for QUIN to 80. The machine will also reduce fixed set-up costs to $200,000 Calculate the manufacturing costs for each product if the machine is purchased 9-2. Should Kallapur purchase the new machine