35 Quality Industries manufactures large workbenches for industrial use. Yewell

Question

35 Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables. Cost data based on sales of 13,000 workbenches: Direct materials (pounds) Direct labor (hours) Machine setups (no. of setups) Mechanical assembly (machine hours) Budgeted QuantityActual Quantity Actual Cost 168,000$3,450,000 825,000 250,000 281,2503,750,000 175,000 72,800 900 273,000 71,500 880 The current cost per unit is (rounded to the nearest whole dollarj: O $588 o $523. O $465 $637 O $445

Explanation / Answer

Quality Industries

Determination of current cost per unit:

Current Cost per unit = total actual cost/number of units

Total actual cost of 13,000 benches –

Direct materials                      $3,450,000

Direct labor                            $825,000

Machine setups                       $250,000

Mechanical assembly             $3,750,000

Total cost                                $8,275,000

Number of benches                 13,000

Current cost per bench           $8,275,000/13,000 =$636.54

Hence, current cost per bench (unit) = $637 (rounded off)

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