C- 2A Tent Master produces two lines of tents sold to odoor enthusiants Pricing

Question

C- 2A Tent Master produces two lines of tents sold to odoor enthusiants Pricing analysis within department A. In department B the tents are ewn and folded. The ABC and a plantwide overhead rate The tents are cut to activities, costs, and drivers a ollow sociated with these two manufacturing processes and the compuny' A P1 P2 64.400 0430Macie hours 560 12.300 2400 Hoving produes 5.630 4200 22.800 Department Sewing 327 400Diecor hours 24000 280 Materials handing Additional production information on the two lises of tents follows. Pup Tent Pop-up Tent Units produced 5.200 ni 1600 moves 420 banches Batches 240 impecsions 5.300 MH 1600 DLH Machine hours Direct labor hours Modification orders Space oceupied Material reqired 2600 DLH 70 modfication anders 210 modification orders 50,300qare yards 470,000square yards Required 1. Using a plantwide overhead rate hased on direct labor hours, compute the overhead cost that is as 2. Using the plantwide overhead rate 3. If the market price of the pup tent is S65 and the murkct proice of dhe pop-op teat is $200, determine the signed to cach pup tent and each pop-ap tet materials and direct labor cost is $25 per pup tent and 532 per pop-ap te determine the totud cnd per unit lor the two prodacts if the direct gross profit per unit for cach tent. Whut mighe manugrmcst conclade ahout the pup se? Using fx cach-the direct labor and direc marials cosis $25 per pup tent and 532 per pop-up test ABC, compute the total cost per unit profit per unit for instead of Alic. depumneatal rates S. I the market price is 565 per pap tent and S30 per pop up teet, determine the gs each tent. Comment on the resalts 6. Would your pricing analysis be improved if the compuny uned machine hours in departmc A and direct labor hours in d department B? Explain

Explanation / Answer

Req 1: Total Overheads of Plant: Department-A 215630 Department-B 399480 Department-C 515600 Total Overheads of Plant 1130710 Total Labour Hours Product Pup Tent 2600 DLH Product Pop-up Tent 1600 DLH Total labour hours 4200 DLH Plantwide Overehads rate per direct labour hours = Total Overheads of Plants/ Total Labour hours (1130,710 /4200) = $269.22 per DLH PUP TENT POP-UP TENT Direct labour hours 2600 1600 Overhead rate per DLH 269.22 269.22 Total Overheads cost 699972 430752 Number of units produced 15,200 7,600 Overheads cost per unit in $ 46.05 56.68 Req 2: Total product cost per unit based on Plant wide Overheads rate PUP TENT POP-UP TENT Direct Material+Direct labor cost 25 32 Overheads cost per unit 46.05 56.68 Total cost per unit 71.05 88.68 Req 3: Gross Profit per unit for each product PUP TENT POP-UP TENT Selling price per unit 65 200 Less:Total Cost per unit 71.05 88.68 Gross Profit per unit -6.05 111.32 Based on Above calculations, Management would consider dropping Product Pup Tent Req4: Activity Rate ACTIVITIES COST DRIVER TOTAL COST ANNUAL COST DRIVER ACTIVITY RATE (Total Cost/Annual Cost driver) Department-A Pattern Allignment Batches 64,400 560 batches $115.00 per batch Cutting machine hours 50,430 12300 MH $4.10 per MH Moving Product Moves 100,800 2400 Moves $42.00 Per move Department-B Sewing DLH 327,600 4200 DLH $78.00 per DLH Inspecting Inspections 24,000 600 Inspections $40.00 per inspection Folding Units 47,880 22800 Units $2.10 per unit Department-Support Design Modification order 280,000 280 modifications $1,000.00 per modification Providing Space Square feet 51,600 8600 sq. ft $6.00 per sq. ft Material handling Square yards 184,000 920,000 sq. yards $0.20 per sq. yards PUP TENT POP-UP TENT Units Produced 15200 7600 Moves 800 1600 Batches 140 420 Number of inspections 240 360 Machine hours 7000 5300 Direct labour hours 2600 1600 Modifications 70 210 Space Occupied 4300 4300 Material required 450,000 470,000 Activity Cost: Department-A Pattern Allignment($115 per batch) 16100 48300 Cutting($4.10 per MH) 28700 21730 Moving Product($42 per move) 33600 67200 Department-B Sewing($78 per DLH) 202800 124800 Inspecting($40 per inspection) 9600 14400 Folding($2.10 per Unit) 31920 15960 Department-Support Design($1000 per modification) 70000 210000 Providing Space($6 per sq. ft) 25800 25800 Material handling($ 0.20 per sq. yards) 90000 94000 Total Activity Cost 508520 622190 Number of units produced 15200 7600 Overheads cost per unit 33.46 81.87 Total Cost per unit under ABC: Material +labour cost 25 32 Overheads Cost perunit 33.46 81.87 Total Cost per unit under ABC: 58.46 113.87

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