Please help with accounting problem. Was each of the company's 3 product lines overcosted or undercosted? and by how much per unit?
Kitchen King's Toledo plant manufactures three product lines , all multi-burner , ceramic cook tops . The plant's three* product models 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 . The Following table displays the basic data upon which the traditional costing system was based . REG ADV GMT Planned annual production : Volume in units 5 , 80 0 Production runs 1 , BBQ 40 runs of 125 units 40 runs of 108 units Direct material $129 20 runs of 58 units $ 151 $ 203 Direct Labor :` ( not including setup ) $171 1 9 hrs . @ $ 19 per hr . ) $ 209 (11 hrs . @ $ 19 per hr . ) $247 ( 13 hrs . @ $19 per hr . ) Machine hours ( MH ) \\per product unit 18 MH 12 MH 17 MH Total machine hours consumed by product line in a year 58 , 808 ( 10 MH x 5 , BOB ) 48 , 808 ( 12 MH X 4 , 890 ) 17 , 808 ( 17 MH X 1 , 808 )` The annual budgeted overhead is $1 , 224, 000 , and the company's predetermined overhead rate is $12 per direct - labor hour . The product costs for the three product models , as reported under the plant's traditional costing system. are shown in the following table . REG ADV GMT Direct material $129 . 80 $ 151 . 80 $ 203 . 80 Direct labor ( not including set - up time ) 171 . 80 / 9 hr . @ $ 19 ) 209 . 80 ( 11 hr . @ $ 10 ) 247 . 60 ( 13 hr . @ $19 ) Manufacturing overhead 108 . 98 19 hr . @ $ 12 ) 132 . 98 ( 11 hr . @ $ 12 ) 156 . 80 ( 13 hr . @ $12 )| Total* $ 408 . 80 $492 . 80 $606 . 08\\ Kitchen King's pricing policy is to set a target price for each product equal to 130 percent of the full product cost ." Due to price competition from other appliance manufacturers . REG units were selling at $525, and ADV units were selling for $628 . These prices were somewhat below the firm's target prices . However , these results were partially offset by greater - than -expected profits on the GMT product line. Management had raised the price on the GMT model to $800 , which was higher than the original target price . Even at this price , Kitchen King's customers did not seem to hesitate to place orders . Moreover , the company's competitors did not mount a challenge in the market for the GMT product line . Nevertheless , concern continued to mount in Toledo about the difficulty in the REG and ADV markets . After all , these were the plant's bread - and-butter products , with projected annual sales of 5,000 REG units and 4. 000 ADV units ."
