Bevams Co. makes tow products, product X and product Y. Bevans has produced prod

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Bevams Co. makes tow products, product X and product Y. Bevans has produced product X for many years without generating anyhazardous wastes. Recently, Bevans developed product Y, whichis superior to product X in many respects. However,production of product Y generates hazardous wastes. Becauseof the hazardous wastes, Bevans now must deal with hazardous wastedisposal, govermental environmental reports and inspections, andsafe handling procedures. Bevas Co. uses a cost driver rate based on machine hours toassign manufactruing support costs to its tow products. Because of concerns about the accuracy of the product costingsyste, Joel Dempsey, the controller, undertook an activity basedcosting analysis of the manufacturing support costs. Theresulting cost information is summarized in the followingtable:                                                              ProductX                          Product Y Direct costs material pluslabor                  9,000,000                        4,000,000 Unit levelsupport                                     2,000,000                          1,000,000 Batch levelsupport                                 15,000,000                       20,000,000 Product levelsupport                                5,000,000                          8,000,000 Environmentalsupport                                                                           14,000,000 Total machinehours                                10,000,000                              6,000,000 Number ofunits                                     100,000,000                          40,000,000 a. Compute product costs per unit for products X and Yusing the current cost driver rate based on machine hours formanufacturing support costs. b. Compute product costs per unit for products X and Yusing the activity based costing figures provided in thetable. c. Explain te reasons for the differences in cost foreach product using the two cost systems. d. Bevans has been selling products X and Y at a priceequal to 1.5 times the product cost computed using the machine hourbased cost driver rate for manufacturing support costs. Compute these prices and provide recommendations to Bevans'management concerning profit improvement through pricing changesand cost reduction through manufacturing profit improvement throughpricing changes and cost reduction through manufacturingimprovements. Bevams Co. makes tow products, product X and product Y. Bevans has produced product X for many years without generating anyhazardous wastes. Recently, Bevans developed product Y, whichis superior to product X in many respects. However,production of product Y generates hazardous wastes. Becauseof the hazardous wastes, Bevans now must deal with hazardous wastedisposal, govermental environmental reports and inspections, andsafe handling procedures. Bevas Co. uses a cost driver rate based on machine hours toassign manufactruing support costs to its tow products. Because of concerns about the accuracy of the product costingsyste, Joel Dempsey, the controller, undertook an activity basedcosting analysis of the manufacturing support costs. Theresulting cost information is summarized in the followingtable:                                                              ProductX                          Product Y Direct costs material pluslabor                  9,000,000                        4,000,000 Unit levelsupport                                     2,000,000                          1,000,000 Batch levelsupport                                 15,000,000                       20,000,000 Product levelsupport                                5,000,000                          8,000,000 Environmentalsupport                                                                           14,000,000 Total machinehours                                10,000,000                              6,000,000 Number ofunits                                     100,000,000                          40,000,000 a. Compute product costs per unit for products X and Yusing the current cost driver rate based on machine hours formanufacturing support costs. b. Compute product costs per unit for products X and Yusing the activity based costing figures provided in thetable. c. Explain te reasons for the differences in cost foreach product using the two cost systems. d. Bevans has been selling products X and Y at a priceequal to 1.5 times the product cost computed using the machine hourbased cost driver rate for manufacturing support costs. Compute these prices and provide recommendations to Bevans'management concerning profit improvement through pricing changesand cost reduction through manufacturing profit improvement throughpricing changes and cost reduction through manufacturingimprovements.

Explanation / Answer

x.Hnbsp; Compute product costs per unit for products X and Y using the current cost driver rate based on machine hours for manufacturing support costs.

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