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Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One ofthe Ferry plants

$($Lakeview$)$ produces home theatre systems. The plant produces three models, Silver, Gold. and Platinum. which differ in

the quality of the components and capability to $$fill$"$ the room with sound.

The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected

for the quarter follow: The team has been discussing two issues. First. there is disagreement about how best to allocate the manufacturing

overhead among the products. The current cost accounting system allocates manufacturing overhead to products bas $[$The following information applies to the questions displayed below.$]$

Ferry Electronics produces a wide variety of video and audio systems for home entertainment. One of the Ferry plants

$($Lakeview$)$ produces home theatre systems. The plant produces three models, Silver, Gold, and Platinum, which differ in

the quality of the components and capability to "fill" the room with sound.

The financial team at Ferry is completing the planning for the coming quarter. Information on volumes and costs expected

for the quarter follow:

The team has been discussing two issues. First, there is disagreement about how best to allocate the manufacturing

overhead among the products. The current cost accounting system allocates manufacturing overhead to products based

on expected unit sales. $($Because Ferry carries no inventory, unit sales are equal to units produced.$)$ Second, there is a

concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better

understanding of possible financial implications if demand should be weaker than expected.

Required:

a$.$ Compute the unit profit for the three products using the cost accounting system currently used at Ferry.

Note: Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to $2$

decimal places. b$.$ Assume that the expected sales mix will remain the same regardless of the total volume of sales. Assume for this requirement only

that the the entire manufacturing overhead can be considered a fixed cost. At the breakeven volume in units, what are the unit sales

for each of the three products? c$.$ Consider the requirement independent from requirement a and $b.$ Using the per unit product line unit profits calculated in

requirement $($a$),$ compute the total profits for each of the products at the volumes calculated in requirement $b.$

Note: Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round your answers to $2$

decimal places. The finance team decides that a two$-$stage system might improve the information available for management. They do an account

analysis and determine that there appear to be two main drivers of overhead: revenue and direct costs. Based on the account analysis,

the team splits the manufacturing overhead into two pools as follows:

d$.$ Compute total and per$-$unit profits by product line based on the expected $($not breakeven$)$ sales by product line using the two$-$stage

cost allocation system developed by the finance team.

Note: Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Round "Unit profit $($loss$)"$

answers to $2$ decimal places. Round your "Total profit $($loss$)"$ answers to nearest whole dollar.One of the team members points out that contribution margin is just revenues less variable costs and suggests the team use a single

allocation base, contribution margin.

f$.$ Compute profits per unit by product line based on the expected $($not breakeven$)$ sales by product line allocating overhead costs by

relative total contribution margins given expected sales.

Note: Round your answers to $2$ decimal places.ed

on expected unit sales. $($Because Ferry carries no inventory, unit sales are equal to units produced.$)$ Second. there is a

concern about a "softening" in the demand for these systems and the managers at Ferry want to get a better

understanding of possible financial implications if demand should be weaker than expected.