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[The following information applies to the questions displayed below.] Knickknack, Inc., manufactures two products: odds and ends. The firm uses a single, plantwide overhead rate

[The following information applies to the questions displayed below.]

Knickknack, Inc., manufactures two products: odds and ends. The firm uses a single, plantwide overhead rate based on direct-labor hours. Production and product-costing data are as follows:

Odds Ends
Production quantity 1,000 units 5,000 units
Direct material $ 160 $ 240
Direct labor (not including setup time) 120 (4 hr. at $30) 180 (6 hr. at $30)
Manufacturing overhead* 384 (4 hr. at $96) 576 (6 hr. at $96)




Total cost per unit $ 664 $ 996









*Calculation of predetermined overhead rate:

Manufacturing overhead budget:
Machine-related costs $ 1,800,000
Setup and inspection 720,000
Engineering 360,000
Plant-related costs 384,000



Total $ 3,264,000







Predetermined overhead rate:

Budgeted manufacturing overhead = $3,264,000


= $96 per direct-labor hour
Budgeted direct-labor hours (1,000)(4) + (5,000)(6)

Knickknack, Inc., prices its products at 120 percent of cost, which yields target prices of $796.80 for odds and $1,195.20 for ends. Recently, however, Knickknack has been challenged in the market for ends by a European competitor, Bricabrac Corporation. A new entrant in this market, Bricabrac has been selling ends for $880 each. Knickknack

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