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Question 2 : Almost Svmmetric Corporation The Almost Symmetric Corporation ( ASC ) has two almost identical products: Kravis and Geffen. The plans for 2

Question 2: Almost Svmmetric Corporation
The Almost Symmetric Corporation (ASC) has two almost identical products: Kravis and
Geffen. The plans for 2022 are to produce and sell 1,000 units of each, Kravis at $75 per unit
and Geffen at $60 per unit. Both products require labor (at $10 per hour) and machine time (at
$20 per hour). In particular, production of one unit of Kravis requires one labor hour and two
machine hours, while a unit of Geffen requires two labor hours and one machine hour. Overhead
for the year (set-up of production batches and quality control) is estimated at $33,000. Assume
that both labor and machine costs are direct costs (not included in overhead) and thus are
allocated in all cases directly to Kravis and Geffen.
Required:
a. Assume the overhead is allocated based on labor dollars. What is the overhead allocation
rate? The per-unit cost and gross margin for each of the products? Any recommendation to
ASC based on your findings?
b. Assume the overhead is allocated based on machine hours. What is the overhead allocation
rate? The-per unit cost and gross margin for each of the products? Any recommendation to
ASC based on your findings?
c. An expensive consultant, MacK-ABC, was hired and after a long investigation suggested
ASC uses an ABC costing system. Further analysis revealed that all overhead should be
classified as a batch level cost, and that Kravis is planned to be produced in 100 batches
while Geffen is planned to be produced in 10 batches. Given ABC is implemented, what is
the per-unit cost and gross margin for each of the products? Any recommendation to ASC
based on your findings?
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