Unit$-$Level and Multiple$-$Level Cost Assignments

CarryAll Company produces briefcases from leather, fabric, and synthetic materials in a single production department. The basic product is a standard brlefcase made from leather and lined with fabric. CarryAll has a good reputation in the market because the standard briefcase is a high$-$quality item that has been produced for many years.

Last year, the company decided to expand its product line and produce specialty brlefcases for special orders. These briefcases differ from the standard in that they vary in size, contain both leather and synthetic materials, and are imprinted with the buyer's logo$.($The standard briefcase is simply imprinted with the CarryAll name in small letters.$)$ The decislon to use some synthetic materials in the briefcase was made to hold down the materials cost. To reduce the labor costs per unit, most of the cutting and stitching on the specialty briefcases is done by automated machines, which are used to a much lesser degree in the production of the standard briefcases. Because of these changes in the design and production of the specialty briefcases, CarryAll management belleved that they would cost less to produce than the standard briefcases. However, because they are specialty Items, they were priced slightly higher; standards are priced at $$33$ and speclalty briefcases at $$35.$

After reviewing last month's results of operations, CarryAll's president became concerned about the profitability of the two product lines because the standard briefcase showed a loss while the specialty briefcase showed a greater profit margin than expected. The president is wondering whether the company should drop the standard brlefcase and focus entirely on specialty items. Units and cost data for last month's operations as reported to the president are as follows:

$\backslash$table$[[,$Standard,Specialty.$],[$Units produced,$10,000,2,500],[$Direct materials,,$],[$Leather $(1$ sq$.$ yd$.$ Standard:; $\frac{1}{2}$ sq$.$ yd$.$ Specialty$),$$$17\mathrm{.}00,$$$8\mathrm{.}30$