parts C-G with work pls.
The following table provides key information about the product lines. (Note: All data have been disguised for confidentiality. However, relations among data items have been preserved.) Eyepieces Sales volume (units) 24,000 Price $64.00 8.00 Unit Variable Costs of Licensing & Patent fees Unit Variable Cost of Direct Labor & Materials 40.00 Unit Contribution Margin (before overhead) $16.00 Unit Profit Margin After Deducting Overhead ($5.00) Binoculars Camera Lens 21,000 7,000 $80.00 $150.00 120.00 25.00 32.00 80.00 $28.00 $ 45.00 $1.75 $10.00 1.2 1.5 2.0 Labor hours / unit The unit contribution margin is computed by subtracting the units cost of licensing and patent fees and direct labor and materials from the selling price. Currently, the firm incurs $1,300,250 in overhead costs annually. It allocates this overhead among product lines using the number of labor hours used by each product line. luorid oli A. Required for part Determine the overhead allocation rate which Zeus is currently using to assign overhead costs and then calculate the total cost per unit using that rate. (Hint: if you have done this correctly, then the Price minus the Total Unit Cost should equal the profit per unit reported above for each of the 3 products) Step 1. Total direct labor hours producing eyepieces? 1.2 X 24,00 - 28,800 Step 2. Total direct labor hours producing binoculars? 1.5 x 2,000 31,500 Step 3. Total direct labor hours producing camera lens? 7.0 7000 4,000 Step 4: Total direct labor hours producing all 3 products 22,200 + 31,500 + 14,000 = 103, 100 Step 5: Overhead rate per direct labor hour: 1,200, 250 divided by 103, 100 $12.6 Step 6: Overhead per unit for eyepieces 24,000 X 1.6 302, woo Check your answer by subtracting it from the contribution margin per unit. You should get the profit margin per unit Step 7: Overhead per unit for binoculars 21,000 X 12.6 264, 600 Check your answer by subtracting it from the contribution margin per unit. You should get the profit margin per unit Step 8 Overhead per unit for camera lens 7,000 =_73,200 Check your answer by subtracting it from the contribution margin per unit. You should get the profit margin per unit Zeus' management realizes that moving to camera lenses is a major shift in their product and market focus. Plus, they know that factory personnel have complained about the increased coordination required for producing lenses. Thus, management wants us to conduct a more detailed study of product costs. We collect the following data. Eyepieces Binoculars Camera Lens Sales volume (units) Machine hours batch size # of batches # of Components in each unit of product # of receiving transactions 24,000 2.400 2.000 12 2 15 21,000 6,000 1,400 15 6 35 7,000 8,000 500 14 20 50 Analyzing the overhead, you discover the following: Item Amount Labor related $302,200 Machine related 352,600 Production order 98,650 First part inspection 75,470 Parts administration 167,500 Inventory management 140,000 Receiving and shipping 57,450 General administration 106,380 Total $1,300,250 You are wondering how best to allocate these costs into cost pools. You settle on forming a total of six pools. Pool 1: Labor related costs. Experience shows that for Zeus Optical direct labor hours is what drives these costs and causes them to vary Pool 2: Machine related costs. These are driven by machine hours Pool 3: Cost related to executing a production order (this would include production orders and first part inspections), allocated using the number of batches. Pool 4: Related to parts administration, which will be allocated based on the number of components in each product B. Pool 5: Costs related to inventory management, receiving and shipping These costs are allocated using the number of transactions per product line (-components * number of transactions) Pool 6 Facility level costs allocated equally among the 3 product lines. Requirements of parts to G. Now use activity base costing Summarize the total amounts in each of the six cost pools and then divide by the cost driver activity (from the data we collected) to determine the per driver unit for each cost pool (except the facility level cost pool has no cost driver so it will not be allocated) Step 1. Total amounts in the 6 cost pools. In some cases you need to add several numbers. In other cases it is just the given number. Labor related costs = $302, 200 Machine related costs - $352, 600 Production order related costs -$174,' 270 Total inventory, receiving and shipping - 3197, 450 Parts administration Facility level -$106,330 Step 2. Rate per driver unit for Labor related costs (pool 1) 3.02,700 divided by 74,300 84.0673 - 3167,500 Step 3. Rate per driver unit for Machine related costs (pool 2) 352, 600 divided by -16, UDD $21.5 Step 4: Rate per driver unit for Production order related costs (pool 3) 174, 120 divided by ul $4,246.83 Step 5 Rate per product line for parts administration (pool 4) 167,500 divided by_314000 - $ 0.5334 Step 6: Rate per driver unit for Inventory, receiving, shipping costs (pool 5) 197,450 divided by nuo $159.2339 Step 7 Rate per product line for facility level costs (pool 6) : -$35460 106,380/3 C. Next determine the total amount of overhead allocated to each of the 3 product lines. Total overhead for eyepieces: Pool 1 22,200.X 4.oz Pool 2 X 71.5 Pool 3 X 4,746.8 Pool 4 X 0.53 Pool 5 x_159.23 Pool 6 2.400 12 TOTAL OVERHEAD ALLOCATED TO EYEPIECES - Total overhead for binoculars: Pool 1 Pool 2 Pool 3 X Pool 4 X Pool 5 X Pool 6 TOTAL OVERHEAD ALLOCATED TO BINOCULARS = Total overhead for camera lens: Pool 1 Pool 2 Pool 3 Pool 4 Pool 5 Pool 6 TOTAL OVERHEAD ALLOCATED TO CAMERA LENS D. Now compute the cost per unit of overhead Product Total Overhead blowAllocated Production in Units Overhead Cost Unit per EYEPIECES BINOCULARS CAMERAL LENS: E. Now compute the total unit cost and the profit margin per unit using activity based costing. Product License Direct Overhead Total Unit materials Cost per unit and labor unit Cost & patent fees per per unit EYEPIECES BINOCULARS: CAMERAL LENS: Product Selling Price Total Unit Cost Profit Margin Per Unit EYEPIECES BINOCULARS CAMERAL LENS: 7 NOTE: ANSWERING PARTS F AND G OF ZEUS OPTICALS BELOW There is no "single" correct answer. Your answers should show some thought and professional presentation. If you are unwilling to be professional in your answer, then we are unwilling to give you full credit. Short phrase, single word scrawled answers will not receive full credit. F. Based on the ABC profit margins, what actions would you recommend for Zeus' management. 101203 G. Suppose Zeus were to achieve a level of sales for camera lenses equal to 14,000 units (two times the current level). How would this affect your analysis of the profitability of this product line and what additional inform tion if any would you need in order to improve your analysis
