Horten Sporting Goods Corporat
Horten Sporting Goods Corporation makes two types of racquets,tennis and badminton. The company uses the same facility to makeboth products even though the processes are quite different. Thecompany has recently converted its cost accounting system toactivity-based costing. The following are the cost data that JanePrice, the cost accountant, prepared for the third quarter of 2018(during which Horten made 70,000 tennis racquets and 30,000badminton racquets). Direct Cost Tennis Racquet (TR) BadmintonRacquet (BR) Direct materials $ 28 per unit $ 20 per unit Directlabor 34 per unit 28 per unit Category Estimated Cost Cost DriverAmount of Cost Driver Unit level $ 750,000 Number of inspectionhours TR: 15,000 hours; BR: 10,000 hours Batch level 250,000 Numberof setups TR: 80 setups; BR: 45 setups Product level 150,000 Numberof TV commercials TR: 4; BR: 1 Facility level 650,000 Number ofmachine hours TR: 30,000 hours; BR: 35,000 hours Total $ 1,800,000Inspectors are paid according to the number of actual hours worked,which is determined by the number of racquets inspected. Engineerswho set up equipment for both products are paid monthly salaries.TV commercial fees are paid at the beginning of the quarter.Facility-level cost includes depreciation of all productionequipment. Required Compute the cost per unit for each product. Ifmanagement wants to price badminton racquets 30 percent above cost,what price should the company set?
You have answer in the data base on over head allocation tennisfor units 450,00 not sure how to get this .For each of overheadallocation I need to give weight and rate. If get do one I can dothe rest . How would calculate minimum price for the tennisracquet
Answer:
| Allocation ofOverhead Cost | ||||||||
| Category | Estimated Cost(A) | Activity Pool(B) | Cost Driver | Activity Rate(C=A/B) | Tennis Racquet | Badminton Racquet | ||
| $ | No. of Activity (D) | $(D*C) | No. of Activity ( E) | $ (EXC) | ||||
| Unit Level | $7,50,000 | 25000 | Number of inspection hours | $30.00 | 15000 | $4,50,000 | 10000 | $3,00,000 |
| Batch Level | $2,50,000 | 125 | Number of setups | $2,000.00 | 80 | $1,60,000 | 45 | $90,000 |
| Product Level | $1,50,000 | 5 | Number of TV commercials | $30,000.00 | 4 | $1,20,000 | 1 | $30,000 |
| Facility Level | $6,50,000 | 65000 | Number of machine hours | $10.00 | 30000 | $3,00,000 | 35000 | $3,50,000 |
| Total overhead cost | $18,00,000 | $10,30,000 | $7,70,000 | |||||
| Units produced | 70,000 | 30,000 | ||||||
| Overhead cost per unit | $14.71 |
$25.67 |
||||||
| Computation ofprice per unit : | ||
| Tennis Racquet | Badminton Racquet | |
| $ | $ | |
| Direct Material | $28.00 | $20.00 |
| Direct Labor | $34.00 | $28.00 |
| Overhead cost per unit | $14.71 | $25.67 |
| Total cost per unit | $76.71 | $73.67 |
| Price of badminton racquets =$ 73.67 x 130 % = $ 95.77. | ||
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