Mangerial accounting *simplfied answers by a/b/c.... but please show work The as

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Mangerial accounting
*simplfied answers by a/b/c.... but please show work
The assignment basis for manufacturing support costs has been direct labor r For 20X5, Come-On-In the two types of entry doors: Deluxe and Standana and Standard compiled the following data for the two products: Sales (in units) DeluxeStandard 50,000400,000 Sales price per unit Direct material and labor costs per unit Manufacturing support costs per unit 5650.00 $475.00 $180.00 $130.00 $120.00 $80.00 Last year, Come-On-In Manufacturing purchased an expensive robotics sysem to allow for more decorative door products in the deluxe product linc. The C suggested that an ABC analysis could be valuable to help evaluate a produs ac promotion strategy for the next sales campaign, Shc obtained the following information for 20X5: mix and ABC rid Activity Setups Cost DriverCont of setups 50000 Deluse Standard 500,000 400 100 Machine-related of machine hours $44,000,000 300,000 3 Packing of shipments 5,000,000 50,000 200,000 uired a. Using the current system, what is the estimated b. Using the current system, estimated manufacturing overhead costs per unit are c. Review the machinc-related costs above. What is a likely explanstion for total cost of manufacturing one unit for each type of door? 1. 2. profit per unit for each type of door? less for the deluxe door ($80 per unit) than the standard door (S120 per unit). What is a likely explanation for this? machine-related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)? Using the activity-based costing data presented above, i. il. d. compute the cost-driver rate for cach overhead activity. compute the revised manufacturing overhead cost per unit for each type of entry door. ii. compute the revised total cost to manufacture one unit of each type of entry door. e Is the deluxe door as profitable as the original data estimated? Why or why Dor? delute f What considerations need to be examined when strategy?

Explanation / Answer

(a) Under the current system,the estimated

1. The total cost of manufacturing one unit for each type of door = Direct material and labour costs per unit + Manufacturing support costs per unit

For Deluxe = $180 + $80 = $260

For Standard = $130 + $120 = $250

2. Profit per unit for each type of door = Selling price per unit - Total Cost per unit

For Deluxe = $650 - $260 = $390

For Standard = $475 - $250 = $225

(b) Under the current system, estimated manufacturing overhead costs per unit are less for the Deluxe door ($80) than the Standard door ($120). The most likely explanation for this can be that the assignment basis for manufacturing support costs has been direct labour dollars. Since the sales in units of standard door is more than that of deluxe door so correspondingly its production units will also be more and hence direct labour dollars for standard door will be more showing it to be a more labour intensive product. Hence it will have higher manufacturing overhead costs per unit.

(d) i. Calculation of cost - driver rate for each overhead activity :

Setups: For deluxe = $500000 = $1250/unit , For Standard = $500000 = $5000/unit

$400 $100

Machine related : For Deluxe and Standard = $44000000   = $147/unit (rounded off)

$300000

Packing : For Deluxe = $5000000 = $100/unit , For Standard = $5000000 = $25/unit

$50000 $200000

(f) Following considerations need to be examined while determining a sales mix strategy:

1. True costs to produce an item, per unit cost taking into account labour, material, overhead costs and also allocated administrative expenses.

2. Profitability of producing and selling each item.

3. Perform a SWOT analysis to help make final decision by assessing one's strengths(S), weaknesses(W), opportunities(O) and threats(T)

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