DK manufactures three products, W, X and Y. Each product uses the same materials and the same type of direct labour but in different quantities. The company currently uses a cost plus basis to determine the selling price of its products. This is based on full cost using an overhead absorption rate per direct labour hour. However, the managing director is concerned that the company may be losing sales because of its approach to setting prices. He thinks that a marginal costing approach may be more appropriate, particularly since the workforce is guaranteed a minimum weekly wage and has a three month notice period. Required: a) Given the managing director's concern about DK's approach to setting selling prices, discuss the advantages and disadvantages of marginal cost plus pricing AND total cost-plus pricing. The direct costs of the three products are shown below: Product W Y Budgeted annual production (units) 15,000 24,000 20,000 $ per unit $ per unit $ per unit Direct materials 35 40 45 Direct labour ($10 per hour) 40 30 50 In addition to the above direct costs, DK incurs annual indirect production costs of $1,044,000. b) Calculate the full cost per unit of each product using DK's current method of absorption An analysis of the company's indirect production costs shows the following: 2$ Cost driver Material ordering costs 220,000 Number of supplier orders Machine setup costs 100,000 Number of batches Machine running costs 400,000 Number of machine hours General facility costs 324,000 Number of machine hours The following additional data relate to each product: Product W Y Machine hours per unit 4 Batch size (units) 500 400 1000 Supplier orders per batch 4 c) Calculate the full cost per unit of each product using activity-based costing and briefly comment on the contrast to your results in part (b).

Techno Instruments uses a manufacturing costing system with one​ direct-cost category​ (direct materials) and three​ indirect-cost categories: a. ​Setup, production-order, and​ materials-handling costs that vary with the number of batches b. ​Manufacturing-operations costs that vary with​ machine-hours c. Costs of engineering changes that vary with the number of engineering changes made In response to competitive pressures at the end of 2016​, Techno Instruments used​ value-engineering techniques to reduce manufacturing costs. Actual information for 2016 and 2017 is as​ follows:     2016 2017 Setup, production-order, and materials-handling costs per batch $8,600 $7,800 Total manufacturing-operations cost per machine-hour $59 $53 Cost per engineering change $18,750 $14,000   The management of Techno Instruments wants to evaluate whether value engineering has succeeded in reducing the target manufacturing cost per unit of one…

Chocolate Bars, Inc. (CBI), manufactures creamy deluxe chocolate candy bars. The firm has developed three distinct products: Almond Dream, Krispy Krackle, and Creamy Crunch.   CBI is profitable, but management is quite concerned about the profitability of each product and the product costing methods currently employed. In particular, management questions whether the overhead allocation base of direct labor-hours accurately reflects the costs incurred during the production process of each product.   In reviewing cost reports with the marketing manager, Steve Hoffman, who is the cost accountant, notices that Creamy Crunch appears exceptionally profitable and that Almond Dream appears to be produced at a loss. This surprises both him and the manager, and after much discussion, they are convinced that the cost accounting system is at fault and that Almond Dream is performing very well at the current market price.   Steve decides to hire Jean Sharpe, a management consultant, to study the…

RelyaTech Corporation manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their selling price gross margin contribution margin per unit of the constrained resource contribution margin