Problem 5-20A (Algo) Cost management with an ABC system LO 5-3 Walton Chairs, Incorporated makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Model Diamond (D) $ 20.00 per unit $ 17.20/hour x 2.00 hours production time Cost Driver Estimated Cost $ 279,000 825,000 432,000 368,000 Number of units Number of setups Number of TV commercials Number of machine hours $ 1,904,000 Model Gold (G) $10.00 per unit $ 17.20/hour x 1.00 hour production time Use of Cost Driver D: 12,000 units; G: 33,000 units D: 116 setups; G: 214 setups D: 7; G: 9 D: 2,300 hours; G: 2,300 hours The market price for office chairs comparable to Model Diamond is $121 and to Model Gold is $78. Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 103 units of Model Diamond per batch and 154 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. (For all requirements, round intermediate calculations and final answers to 2 decimal places.) Type of Product a. Model Diamond a. Model Gold b. Model Diamond b. Model Gold Cost per Unit