Pioneer Electronics Inc (PEI) operates in the computer industry. PEI has two divisions: the Lap Top Computer Division and the Maintenance & Repaid (MR) Division. The computer division manufactures computers in several plants located in Eastern Canada. The product lines run from relatively simple economic models to high end multi function designs. PEI also operates an MRdivision in Montreal. The MR division offers three products: Standard, Plus and Star. The MR Division reported the following activity for the month of February:

The unit costs are divided as follows:

70 percent production and 30 percent marketing and customer service.

Direct labor cost is the only driver used for tracing and is also the only variable cost. All other costs are fixed.

Typically, the division uses only production costs to define unit costs. The preceding unit product cost information was provided at the request of the marketing manager and was the result of a special study.

David Collins, the president of PEI, is reasonably satisfied with the performance of the MRDivision. Februarys performance is fairly typical of what has been happening over the past two years. The Computer Division, however, is another matter. Its overall profit performance has been declining. Two years ago, income before income taxes had been about 25 percent of sales. Februarys dismal performance was also typical for what has been happening this year and is expected to continueunless some action by management is taken to reverse the trend. During February, the Computer Division reported the following results:

The warranty work is under the responsibility of the sales group. The rework is usually related to production defects that need to be fixed before shipping the product to the customer.During February, the computer division purchased materials totaling $312,000. There are no significant inventories of supplies (beginning or ending). Supplies are accounted for separately from materials. PEIs computer division had sales totaling $1,170,000 for February.

1) Compute two different unit costs for each of the MR Divisions products based on these 2 management objectives : Financial reporting and Pricing. 2) Discuss the differences between the MR Divisions products and the Computer Divisions products.

3) Prepare an income statement for the MR Division for February using the format for financial reporting purposes.

4).For the MR Division, calculate the breakeven point by the bundle for the whole division and also for each product line. Determine and comment on the margin of safety % for the division.

Standard 50.000 16 $ Plus 500,000 30 $ Star 300,000 40 $ Sales (units) Price per unit Unit costs: Directly traced Overhead - Driver traced Overhead - Allocated A $ $ 3 $ 2 $ 10 $ 5$ 4 S 13 $ 7 6 15 $ $ $ $ $ $ 23,000 40,000 130,000 45,000 480,000 375,000 Inventories: Materials, February 1 Materials, February 28 Work in process, February 1 Work in process, February 28 Finished goods February 1 Finished goods, February 28 Costs: Direct Labour Plant and equipment depreciation Materials handling Inspections Scheduling Power Plant supervision Manufacturing enginerring Sales commission Salary, sales supervisor Supplies Warranty work Rework $ $ $ $ $ $ $ $ $ $ $ $ $ 117,000 50,000 85,000 60,000 30,000 30,000 12,000 21,000 120,000 10,000 17,000 40,000 30,000 Standard 50.000 16 $ Plus 500,000 30 $ Star 300,000 40 $ Sales (units) Price per unit Unit costs: Directly traced Overhead - Driver traced Overhead - Allocated A $ $ 3 $ 2 $ 10 $ 5$ 4 S 13 $ 7 6 15 $ $ $ $ $ $ 23,000 40,000 130,000 45,000 480,000 375,000 Inventories: Materials, February 1 Materials, February 28 Work in process, February 1 Work in process, February 28 Finished goods February 1 Finished goods, February 28 Costs: Direct Labour Plant and equipment depreciation Materials handling Inspections Scheduling Power Plant supervision Manufacturing enginerring Sales commission Salary, sales supervisor Supplies Warranty work Rework $ $ $ $ $ $ $ $ $ $ $ $ $ 117,000 50,000 85,000 60,000 30,000 30,000 12,000 21,000 120,000 10,000 17,000 40,000 30,000