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Sleep-Tight Manufacturing produces two types of bed: King and Queen. The assignment basis for support costs has been direct labor pesos. For 2030, Sleep-Tight compiled
Sleep-Tight Manufacturing produces two types of bed: King and Queen. The assignment basis for support costs has been direct labor pesos. For 2030, Sleep-Tight compiled the following data for the two products: King Queen Sales units 200,000 1,600,000 Sales price per unit P2,600.00 P1,900.00 Direct material and labor costs per unit P720.00 P520.00 Manufacturing support costs per unit P320.00 480.00 Last year, Sleep-Tight Manufacturing purchased an expensive robotics system to allow for more decorative bed products in the King product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2030: Activity Cost Driver Cost Total Deluxe Standard Setups of setups P2,000,000 2,000 1,600 400 Machine-related of machine hours P176,000,000 2,400,000 1,200,000 1,200,000 Packing of shipments P20,000,000 1,000,000 200,000 800,000 Currently estimated King total cost per unit is P1040 Currently estimated Queen total cost per unit is P1000 Currently estimated Kings profit per unit is P1,560 Currently estimated Queens profit per unit is P900 Using the activity-based costing data presented above, manufacturing overhead cost driver rates: Setup activity is P1,000/setup Machine-related activity is P73.33/machine hour Packing activity is P20/shipment The revised manufacturing overhead cost per unit for King is P468 per unit and Queen is P65.25 per unit. The revised total cost to manufacture one unit of each type of King is P1188.00 and Queen is P585.25. Required: Using the current system, estimated manufacturing overhead costs per unit are less for the King (P320 per unit) than the Queen (P480 per unit). What is a likely explanation for this? Review the machine-related costs above. What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the King (1,200,000 hours) are the same as for the Queen (1,200,000 hours)? Is the King as profitable as the original data estimated? Why or why not? Revised profit per unit for the King is ________________? Revised profit per unit for the Queen is ______________? Currently estimated Kings profit per unit is ______________? Currently estimated Queens profit per unit is _____________? 4. What considerations need to be examined when determining a sales mix strategy?
Sleep-Tight Manufacturing produces two types of bed: King and Queen. The assignment basis for support costs has been direct labor pesos. For 2030, Sleep-Tight compiled the following data for the two products:
King Queen
Sales units 200,000 1,600,000
Sales price per unit P2,600.00 P1,900.00
Direct material and labor costs per unit P720.00 P520.00
Manufacturing support costs per unit P320.00 480.00
Last year, Sleep-Tight Manufacturing purchased an expensive robotics system to allow for more decorative bed products in the King product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2030:
Activity Cost Driver Cost Total Deluxe Standard
Setups of setups P2,000,000 2,000 1,600 400
Machine-related of machine hours P176,000,000 2,400,000 1,200,000 1,200,000
Packing of shipments P20,000,000 1,000,000 200,000 800,000
Currently estimated King total cost per unit is P1040
Currently estimated Queen total cost per unit is P1000
Currently estimated Kings profit per unit is P1,560
Currently estimated Queens profit per unit is P900
Using the activity-based costing data presented above, manufacturing overhead cost driver rates:
Setup activity is P1,000/setup
Machine-related activity is P73.33/machine hour
Packing activity is P20/shipment
The revised manufacturing overhead cost per unit for King is P468 per unit and Queen is P65.25 per unit.
The revised total cost to manufacture one unit of each type of King is P1188.00 and Queen is P585.25.
Required:
Using the current system, estimated manufacturing overhead costs per unit are less for the King (P320 per unit) than the Queen (P480 per unit). What is a likely explanation for this?
Review the machine-related costs above. What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the King (1,200,000 hours) are the same as for the Queen (1,200,000 hours)?
Is the King as profitable as the original data estimated? Why or why not?
Revised profit per unit for the King is ________________?
Revised profit per unit for the Queen is ______________?
Currently estimated Kings profit per unit is ______________?
Currently estimated Queens profit per unit is _____________?
4. What considerations need to be examined when determining a sales mix strategy?
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