1. Usingdataintheexhibits,determinethecostofa100-unitbatchofmodelBAC-29,amonth'sspareparts,andamonth'sworkdoneforotherdivisionsunderthepresent method,Sandy's first proposal, and her revisedproposal.

1. Arethecostdifferencesamongthemethodssignificant?Whatcausesthesedifferences?

1. Assumethatproducingabatchof100modelBAC-29injectorsrequires126hours,distributedbydepartmentasshowninExhibit3,and$4,200worthofmaterials.BACsellsthesecarburetorsfor$115each.Determineifthiswouldbeprofitableatgrossprofitlevel?(AnswerusingboththepresentandSandy'sfirstproposedcosting methods).

1. Whatbenefits,ifany,doyouseetoBACifeitheroftheproposedcostingmethodisadopted?Considerthisquestionfromthestandpointof(a)productpricing,(b)cost control, (c)measuring departmental performance, and (d) diagnostic useofcostdata.WhatdoyouthinkBACshoulddoregardingtheircostingprocedures?

1. Arethereanysimilaritiesbetweeneitheroftheproposedcostingmethodandactivity based costing? Justify your answers withappropriateexplanations.

Exhibits

Exhibit 1: Calculation of plant-widelabourandoverheadhourly rates forJuly

Department	Amount($)	Hours
Labour
Casting and stamping	54,604	2,528
Grinding	38,520	2,140
Machining	191,876	7,675
Custom work	81,664	3,712
Assembly	291,784	15,357
Total labour	658,448	31,412
Overheads	1,099,321
Totallabourandoverheads	1,757,769

Hourly rates	$20.96
Overheads	$35.00
Total	$55.96

Exhibit 2: Proposed departmental labourandoverheadhourly rates

Department	Perhourrates ($)	TotalOverheads
Labour	Overheads	Total
Casting andstamping	21.60	31.37	52.97	79,303
Grinding	18.00	30.14	48.14	64,500
Machining	25.00	62.52	87.52	479,841
Custom work	22.00	40.48	62.48	150,262
Assembly	19.00	21.19	40.19	325,415
				1,099,321

Exhibit 3: Direct labour-hourdistribution forthreeCFI divisionactivities

Department	BAC-29	Spare partsforinventory	Work forother divisions
(Hours perbatch of100 units)	(Hours pertypicalmonth)	(Hours pertypicalmonth)
Casting andstamping	21	304	674
Grinding	12	270	540
Machining	58	1,115	2,158
Customwork	-	-	-
Assembly	35	-	-
	126	1,689	3,372

Exhibit 4: Departmental Overhead rates basedon normalvolume

Department	Normalvolume (labourhours)	Normaloverheadcost*($)	Overheadperdirectlabourhour($)
Casting andstamping	2,500	78,800	31.52
Grinding	2,400	69,000	28.75
Machining	8,000	492,000	61.50
Custom work	3,600	147,820	41.06
Assembly	17,500	352,450	20.14
Total / Average	34,000	1,140,070	33.53

* Estimated overhead cost if eachdepartmentoperates at its normal volume