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Walton Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though
Walton Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of the year (during which Walton made 71,000 tennis racquets and 30,600 badminton racquets). Direct Cost Direct materials Direct labor Tennis Racquet (TR) $ 17.60 per unit 31.00 per unit Badminton Racquet (BR) $ 14.50 per unit 27.70 per unit Category Unit level Batch level Product level Facility level Total Estimated Cost $930,000 256,000 152,500 567,000 $ 1,905,500 Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 15,600 hours; BR: 14,400 hours TR: 83 setups; BR: 45 setups TR: 4; BR: 1 TR: 31,800 hours; BR: 31,200 hours Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment. Required a. Compute the cost per unit for each product. b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
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Step: 1
a Compute the cost per unit for each product 1 Direct Costs Direct materials cost per unit Tennis Racquet TR 1760 Badminton Racquet BR 1450 Direct lab...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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