Answer:
Horten Sporting Goods Corporation
TR BR
a. Cost per unit $66.98 $62.08
b. Price of Badminton Racquets = $80.70
Explanation:
a) Data and Calculations:
Tennis Badminton
Racquets Racquets
Units produced 70,000 30,000
Direct costs:
Direct materials $17.10 per unit $14.80 per unit
Direct labor 33.50 per unit 23.10 per unit
Category Estimated Cost Driver Amount of Cost Driver
Cost TR BR Total
Unit level $736,000 Number of inspection hrs 15,900 7,100 23,000
Batch level 353,800 Number of setups 83 39 122
Product level 152,500 Number of TV commercials 4 1 5
Facility level 630,000 Number of machine hrs 30,600 39,400 70,000
Total $1,872,300
Overhead Rates:
Inspection = $32 ($736,000/23,000) per inspection hour
Equipment setup = $2,900 (353,800/122) per equipment setup
TV commercials = $30,500 ($152,500/5) per commercial
Depreciation = $9 ($630,000/70,000) per machine hour
Overhead Allocation:
TR BR Total
Inspection = $32 $508,800 $227,200 $736,000
($32*15,900) ($32*7,100)
Equipment setup = $2,900 240,700 113,100 353,800
($2,900*83) ($2,900*39)
TV commercials = $30,500 122,000 30,500 152,500
($30,500 *4) ($30,500 *1)
Depreciation = $9 275,400 354,600 630,000
($9 * 30,600) ($9 * 39,400)
Total allocated expenses $1,146,900 $725,400 $1,872,300
Units produced 70,000 30,000
Overhead cost per unit $16.384 $24.18
Cost per unit:
TR BR
Direct materials $17.10 $14.80
Direct labor 33.50 23.10
Overhead cost 16.38 24.18
Total cost per unit $66.98 $62.08
Cost of Badminton = $62.08
30% markup = 18.62
Price = $80.70
