Question
*****Revised***** Company XYZ has two fixed price contracts for two different clients. The company has enough capacity for both contracts but is uncertain whether they
*****Revised*****
Company XYZ has two fixed price contracts for two different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable.
Data as follows:
CustomerAAABBB
Component TypeA999B999
Contract Value($)$27,000$100,000
Contract Quantity1,000 unit2,000 units
Materialcost/unit$15$20
Molding time/batch5 hours7.5hours
Batch Size100 units50 units
Annual Budgeted overheads as follows:
ActivityCost DriverCostdriverCost
volume/yearpool
MoldingMolding hours2,000$150,000
InspectionBatches150$75,000
ProductionMgmtContracts20$125,000
Calculate the activity-based costs and profits for each contract.
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