Vroom-Vroom manufactures miniature cars and has determined that its total manufacturing cost of $1,500,000 is a mixture of unit-
level costs, product-level costs, and facility-level costs. Vroom-Vroom has assembled the following information concerning the manufacturing costs and the driver used to allocate the costs in each activity pool (units and product lines). Facility-level costs are not allocated to production. Total Manufacturing Costs Collector Products Retail Products Unit-level costs $600,000 200,000 units 800,000 units Product-level costs 700,000 25 lines 30 lines Facility costs 200,000 N/A N/A $1,500,000 How much cost would be allocated to the Retail division under an activity-based costing system that reflects an appropriate hierarchy? (Please round to the nearest dollar at the end of your calculations)
1 answer:
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Answer:
Since net revenue has increased from $140 million to $246 million = $106 million by considering all costs thus all the costs and revenue shall be considered.
Explanation:
For calculating the present value, all the cost and revenue will be considered.
Original revenue = Sale of 10 million chips
10 million $20 = $200 million
Less: Cost = 10 million $6 = $60 million
Net Revenue = $140 million
In case of introducing new chips
Revenue will be as follows
12 million $25 + 3 million
$20
= $300 million + $60 million = $360 million
Less: Costs 12 million $8 + 3 million
$6
= $96 million + $18 million = $114 million
Net Revenue = $360 - 114 = $246 million
Since net revenue has increased from $140 million to $246 million = $106 million by considering all costs thus all the costs and revenue shall be considered.