Question 2: Almost Symmetric Corporation The Almost Symmetric Corporation (ASC) has two almost identical products: Uris...
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Question 2: Almost Symmetric Corporation The Almost Symmetric Corporation (ASC) has two almost identical products: Uris and Warren. The plans for 2021 are to produce and sell 1,000 units of each, Uris at $75 per unit and Warren 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 Uris requires one labor hour and two machine hours, while a unit of Warren 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 Uris and Warren. 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 Uris is planned to be produced in 100 batches while Warren 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? Question 2: Almost Symmetric Corporation The Almost Symmetric Corporation (ASC) has two almost identical products: Uris and Warren. The plans for 2021 are to produce and sell 1,000 units of each, Uris at $75 per unit and Warren 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 Uris requires one labor hour and two machine hours, while a unit of Warren 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 Uris and Warren. 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 Uris is planned to be produced in 100 batches while Warren 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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