Answer:
1. Using the ABC system, for each style of faucet, compute the estimated overhead cost per unit.
Brass = [(30 x $4,900) + (900 x $150)] / 30,000 units = $9.40 per unit
Chrome = [(25 x $4,900) + (1,000 x $150)] / 50,000 units = $5.45 per unit
White = [(40 x $4,900) + (800 x $150)] / 40,000 units = $7.90 per unit
2. Compute the estimated operating profit per unit.
Brass = $40 - $8 - $15 - $9.40 = $7.60
Chrome = $20 - $4 - $3 - $5.45 = $7.55
White = $30 - $8 - $9 - $7.90 = $5.10
Explanation:
cost per setup = $465,500 / 95 = $4,900 per setup hour
cost per inspection = $405,000 / 2,700 = $150 per inspection hour
BRASS CHROME WHITE
Projected sales in units 30,000 50,000 40,000
Per unit data: Selling price $40 $20 $30
Direct materials $8 $4 $8
Direct labor $15 $3 $9
Setup hours 30 25 40
Inspection hours 900 1,000 800
