Revised one.

XYZ Company has designed a new and improved widget. Pricing will be determined on a cost-plus basis, and the company standard will be to charge cost plus 35%. XYZ has organized its systems into four departments: Stores, which involves the management of all the raw materials inventories; Production. which manufactures the product; Packaging, which prepares the product for shipment: and Warehousing. in which the nal product is stored until an order is received. Estimates of the costs from each department for the new product are as follows: Stores [raw materials]: Materials $85.00 Direct labour 0.5 hours at $14.50 per hour Machine hours 0.02 hours Variable overhead materials cost it 21 Ill: Production: Materials $530 Direct labour 0.25 hours at $10.00 per hour Machine hours 0.22 hours Variable overhead machine hours I $4.?0 Packaging: Materials $0.25 Direct labour 0.1 hours at $15.50 per hour Machine hours 0.1 hours Variable overhead labour hours it $1.20 per hour Warehousing: Materials $0 Direct labour 0.2-1- hours at $13.00 per hour Machine hours 0.05 hours Variable overhead labour hours I $0.80 per hour The xed cost structure for each department is as follows: Fixed manufacturing Practical Average Planned Department Cost driver overhead capacity activity level actlvlty level Stores Materials costs $516,420 $3.400,000 553.000.000 353200.000 Production Machine hours $306,030 33.000 ?0.200 33.000 Packaging Labour hours $203,340 14,000 12.000 13.020 Warehousing Labour hours $483,240 33.000 30.240 31.500 XYZ currently calculates manufacturing costs as all variable costs plus an allocation of total plant xed manufacturing overhead based on an hourly rate for direct labour hours. The current total labour hours worked in the plant are 135.000. Required: a} Calculate the product price based on the current policy. (3 marks} b) Calculate the product price using a xed manufacturing overhead rate by department calculated using the average department activity. [3 marks} c) Calculate the product price ifthe xed manufacturing overhead rate is calculated by department based on planned activity level. [3 marks)