Ultratech, Inc., manufactures several different types of printed circuit boards; however, two of the boards account for the majority of the companys sales. The first of these boards, a television circuit board, has been a standard in the industry for several years. The market for this type of board is competitive and price-sensitive. Ultratech plans to sell 85,000 of the TV boards in 20x4 at a price of $510 per unit. The second high-volume product, a personal computer circuit board, is a recent addition to Ultratechs product line. Because the PC board incorporates the latest technology, it can be sold at a premium price. The 20x4 plans include the sale of 60,000 PC boards at $855 per unit.

Ultratechs management group is meeting to discuss how to spend the sales and promotion dollars for 20x4. The sales manager believes that the market share for the TV board could be expanded by concentrating Ultratechs promotional efforts in this area. In response to this suggestion, the production manager said, Why dont you go after a bigger market for the PC board? The cost sheets that I get show that the contribution from the PC board is more than double the contribution from the TV board. I know we get a premium price for the PC board. Selling it should help overall profitability.

The cost-accounting system shows that the following costs apply to the PC and TV boards.

	PC Board			TV Board
Direct material	$	249		$	159
Direct labor		4.0	hr.		1.5	hr.
Machine time		1.5	hr.		1.5	hr.

Variable manufacturing overhead is applied on the basis of direct-labor hours. For 20x4, variable overhead is budgeted at $29,877,750, and direct-labor hours are estimated at 385,875. The hourly rates for machine time and direct labor are $38 and $46, respectively. The company applies a material-handling charge at 10 percent of material cost. This material-handling charge is not included in variable manufacturing overhead. Total 20x4 expenditures for direct material are budgeted at $28,455,000.

Andrew Fulton, Ultratechs controller, believes that before the management group proceeds with the discussion about allocating sales and promotional dollars to individual products, it might be worthwhile to look at these products on the basis of the activities involved in their production. Fulton has prepared the following schedule to help the management group understand this concept.

Using this information, Fulton explained, we can calculate an activity-based cost for each TV board and each PC board and then compare it to the standard cost we have been using. The only cost that remains the same for both cost methods is the cost of direct material. The cost drivers will replace the direct labor, machine time, and overhead costs in the old standard cost figures.

Budgeted Cost				Cost Driver	Budgeted Annual Activity for Cost Driver
Procurement	$	1,000,000		Number of parts		10,090,500 parts
Production scheduling		540,000		Number of boards		152,250 boards
Packaging and shipping		1,080,000		Number of boards		152,250 boards
Total	$	2,620,000
Machine setup	$	972,000		Number of setups		367,500 setups
Hazardous waste disposal		136,000		Pounds of waste		28,770 pounds
Quality control		1,240,000		Number of inspections		519,750 inspections
General supplies		192,000		Number of boards		152,250 boards
Total	$	2,540,000
Machine insertion	$	3,400,000		Number of parts		7,032,000 parts
Manual insertion		10,000,000		Number of parts		2,939,000 parts
Wave-soldering		364,000		Number of boards		152,250 boards
Total	$	13,764,000

Required per unit

PC Board

TV Board

Parts:

95

46

Machine insertions

56

45

Manual insertions

39

1

Machine setups

3

2

Hazardous waste disposal

.40

lb.

.04

lb.

Inspections

4

3

2.	On the basis of Ultratechs unit cost data given in the problem, calculate the total amount that each of the two product lines will contribute toward covering fixed costs and profit in 20x4. (Round your intermediate calculations to 2 decimal places.)

3.	Using activity-based costing, calculate the total amount that each of the two product lines will contribute toward covering fixed costs and profit in 20x4. (Round your intermediate calculations to 2 decimal places.)