Question
Wilmington Office Equipment Corporation manufactures two types of filing cabinetsDeluxe and Executiveand applies manufacturing overhead to all units at the rate of $132.00 per machine
Wilmington Office Equipment Corporation manufactures two types of filing cabinetsDeluxe and Executiveand applies manufacturing overhead to all units at the rate of $132.00 per machine hour. Production information follows. |
The controller, who is studying the use of activity-based costing, has determined that the firms overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours, and outgoing shipments, which are the activities three respective cost drivers, follow. |
Deluxe | Executive | Total | |||||||
Setups | 152 | 112 | 264 | ||||||
Machine hours | 52,800 | 74,250 | 127,050 | ||||||
Outgoing shipments | 200 | 150 | 350 | ||||||
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The firms total overhead of $16,770,600 is subdivided as follows: manufacturing setups, $3,659,040; machine processing, $10,062,360; and product shipping, $3,049,200. |
5. | Assume that the current selling price of a Deluxe filing cabinet is $387 and the marketing manager is contemplating a $43 discount to stimulate volume. Is this discount advisable? | ||||
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