Question
Raymond Company produces a variety of bicycles. One of its plants produces two bicycles: a mountain model and a racing model. At the beginning of
Raymond Company produces a variety of bicycles. One of its plants produces two bicycles: a mountain model and a racing model. At the beginning of the year, the following data were prepared for this plant:
In addition, the following information was provided so that overhead costs could be assigned to each product:
Raymond Company uses activity-based costing to calculate product costs.
Required:
A. Calculate the per unit product cost for a mountain bike. B. Calculate the per unit product cost for a racing bike. C. Assume Armstrong Company adds 35% to the cost of a mountain bike and 40% to the
cost of a racing bike obtain the selling prices. Calculate the selling prices for a mountain bike and a racing bike.
| Mountain | Racing | |
| Quantity | 220,000 | 125,000 |
| Selling Price | $1,200 | $1,000 |
| Unit Prime Cost | $ 400 | $ 450 |
| Activity Name | Activity Driver | Activity Cost | Mountain | Racing |
| Machining | Machine hours | $20,000,000 | 250,000 | 250,000 |
| Engineering | Engineering hours | $ 8,000,000 | 75,000 | 50,000 |
| Packing | Packing orders | $ 3,500,000 | 50,000 | 125,000 |
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