Question
Zachary Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the
Zachary 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 2018 (during which Zachary made 68,000 tennis racquets and 31,000 badminton racquets).
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.
-
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?
Direct Cost Direct material Direct labor Tennis Racquet (TR) $20.10 per unit 33.00 per unit Badminton Racquet (BR) $14.70 per unit 23.10 per unit Estimated Cost Cost Driver Amount of Cost Driver Category Unit level Batch level Product level Facility level $ 690,000 300,000 145,000 700,000 $1,835,000 Number of inspection hours Number of setups Number of TV co Number of machine hours TR: 14, 400 hours BR: 8,600 hour:s TR: 83 setups BR 42 setups TR: 3 BR: 2 TR: 31,400 hours; BR: 38, 600 hours mmercials Total Type of Product Tennis Racquet Badminton Racquet Cost per Unit 15.18 Price of badminton racquets
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started