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More Into Campo does not like what he sees. "If you show headquarters this analysis, they - X are going to ask us to phase out the Maximum line, which we have just introduced. More info This whole costing stuff has been a major problem for us. First Mammoth was not profitable and now Maximum isn't. "Looking at the ABC analysis, I see two problems. First, we do many more Based on the following income statement for the year ended November 30, 2020, senior management at Boisvert have activities than the ones you have listed. If you had included all activities, maybe decided to concentrate Pratt's marketing resources on the Maximum model and to begin to phase out the Mammoth your conclusions would be different. Second, you used number of setups and model because Maximum generates a much bigger operating income per unit. number of inspections as allocation bases. The numbers would be different had you used setup-hours and inspection-hours instead. I know that measurement Pratt Electronics problems precluded you from using these other cost-allocation bases, but I believe you ought to make some adjustments to our current numbers to compensate for Income Statement for the these issues. I know you can do better. We can't afford to phase out Fiscal Year Ended November 30, 2020 either product." Jamison knows that his numbers are fairly accurate. As a quick check, he calculates the profitability of Maximum and Mammoth using more Mammoth Maximum Total and different allocation bases. The set of activities and activity rates he had used Revenues $ 23,832,000 5 7,620,000 $ 31,452,000 results in numbers that closely approximate those based on more detailed analyses. He is confident that headquarters, knowing that Maximum was Cost of goods sold 15,019,200 5,257,800 20,277,000 introduced only recently, will not ask Pratt to phase it out. He is also aware that a sizable portion of Campo's bonus is based on division revenues. Phasing out Gross margin 8,812,800 2,362,200 11,175,000 either product would adversely affect his bonus. Still, he feels some pressure from 1.524.000 7,482,000 Selling and administrative expense 6,858,000 Campo to do something Operating income 2,854,800 5 838,200 $ 3,693,000 Units produced and sold 24,000 8,000 Operating income per unit sold 118.95 5 138.70 Print Done Details for cost of goods sold for Mammoth and Maximum are as follows: Mammoth Maximum Data table Total Per Unit Total Per Unit Direct materials S 5,488,800 $ 228.70 $ 3,852,000 S 842.00 Units of the Cost-Allocation Base Direct manufacturing labor (a) 468,000 19.50 273,000 45.50 Maximum Total 3,782,400 157.60 472,800 Mammoth 78.80 Activity Center (Cost-Allocation Base) Total Activity Costs Machine costs Soldering (number of solder points) S 1.085,000 1,170,000 250,000 1,420,000 786.30 Total direct costs 0,738,200 $ 105.80 $ $ 008'469'+ Shipments (number of shipments) 1,281,000 16,700 9,300 28,000 Manufacturing overhead costs (c) 5,280,000 220.00 680,000 110.00 Quality control (number of inspections) 1.141,000 56,700 13,300 70,000 Total cost of goods sold 15,019,200 $ 125.80 $ 5,257,800 S 276.30 Purchase orders (number of orders) 1,170,000 85,700 108,300 195,000 (a) Mammoth requires 1.5 hours per unit and Maximum requires 3.5 hours per unit. The direct manufacturing labor cost Machine power (machine-hours) 57,000 176,100 13,900 190,000 is $13.00 per hour. by Machine costs include lease costs of the machine, repairs, and maintenance. Mammoth requires & machine-hours Machine setups (number of setups) 1.248,000 16,400 18,600 35,00 0 er unit and Maximum requires 4 machine-hours per unit. The machine-hour rate is $10.70 per hour. cl Manufacturing overhead costs are allocated to products based on machine-hours at the rate of $27.50 per hour. Total manufacturing overhead S 6,840,000 Print Done Print DonePratt Electronics, a division of Boisvert Corporation, manufactures two larg a newer model introduced Pratt's controller, Sonny Jamison, is advocating the use of activity-based costing and activity-based management and has gathered information about the company's head costs for the year in early 2018 that sells for $1,270. ended November 30, 2020. After completing his analysis, Jamison shows the results to Curt Campo, the Pratt division president. i)(Click the icon to view additional information.) (Click the icon to view the ABC data.) 1 (Click the icon to view Campo's response.) Read the requirements. Requirement 1. Using activity-based costing, calculate the gross margin per unit of the Maximum and Mammoth models. Begin by calculating the total cost of goods sold for each model. (Round intermediary calculations to the nearest cent.) Mammoth Maximum Direct costs Direct materials Direct manufacturing labor Machine costs Total direct costs Indirect costs Soldering Shipments Quality control Purchase orders Machine power Machine setups Total indirect costs Total cost of goods sold Now calculate the total gross margin and gross margin per unit for each model using activity-based costing. (Round the per unit amounts to the nearest cent) Mammoth Maximum Gross margin - total Gross margin per unit