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Kevin's Kitchen's Detroit plant manufactures three product lines, all multi-burner, ceramic cook tops The plant's three product lines are the Regular (REG), the Advanced (ADV)
Kevin's Kitchen's Detroit plant manufactures three product lines, all multi-burner, ceramic cook tops The plant's three product lines are the Regular (REG), the Advanced (ADV) and the Gourmet (GMT. Until recently, the plant used a job-order product-costing system, with manufacturing overhead applied on the basis of direct labor hours Based on Kein's Kitchen's usual markup percentage, Kevin's Kitchen was losing sales for the REG and ADV models, but was struggling to meet demand for the GMT model, even though they had increased the markup slightly over its normal percentage Since REG and ADV were the bed and butter products, management was concerned that other companies were under-pricing them in the market. Management was proud of the popularity of its GMT model, they could not sell a sufficient number of this product to remain profitable External consultants hired by the company recommends that the company covert to an ABC costing model to obtain a "more accurate" cost on which to apply the normal markup percentage. As a member of the consulting team, you have been asked to prepare a report explaining the alternative prices suggested by ABC costing Kevin's Kitchen management has provided you the following information DATA INPUT REG ADV GMT Units Produced Direct Labor per unit Total Hours 5,000 4,000 1,000 10,000 45,000 44,000 13,000 102,000 Cost per DL Hour DL per unit $ 19.00 $19.00$ 19.00 $ 171.00 $ 209.00 $ 247.00 Direct Materia $ 129.00$ 151.00$ 203.00 Targeted sales price 130% 130% 130%
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