FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Eastern Chemical Company produces three products. The operating results of the current year are:
Actual
Price
Sales
Product Quantity
B
C
1,858
9,250
925
Target
Price
$ 381.00
313.60
218.50
Direct materials
Direct labor
Total prime cost
$
The firm sets the target price of each product at 150% of the product's total manufacturing cost. It appears that the firm was able to sell
Product Cat a much higher price than the target price of the product and lost money on Product B. Tom Watson, CEO, wants to
promote Product C much more aggressively and phase out Product B. He believes that the information suggests that Product C has
the greatest potential among the firm's three products because the actual selling price of Product C was almost 50% higher than the
target price, while the firm was forced to sell Product B at a price below the target price.
382.88
271.60
326.00
Both the budgeted and actual factory overhead for the current year are $847,300. The actual units sold for each product also are the
same as the budgeted units. The firm uses direct labor dollars to assign manufacturing overhead costs. The direct materials and direct
labor costs per unit for each product are:
Product costs:
Product A
$66.08
36.00
82.8
Number of setups
Weight of direct materials (pounds)
Waste and hazardous disposals
Quality inspections
Utilities (machine hours)
Total
Difference
$1.00
(42.00)
$187.50
The controller noticed that not all products consumed factory overhead similarly. Upon further investigation, she identified the
following usage of factory overhead during the year:
Activity system
ABC-based product pricing:
Target price
Actual selling price
Diffe
in price
Product B
$ 130.48
28.08
8.48
Required 3
Complete this question by entering your answers in the tabs below.
Product C
$ 81.00
18.50
99.50
Product A Product B
3
6
416
266
41
61
46
51
3,700
8,600
Required:
1. Determine the manufacturing cost per unit for each of the products using the volume-based method.
2. What is the least profitable and the most profitable product under both the current and the ABC systems?
3. What is the new torget price for each product based on 150% of the new costs under the ABC system? Compare this price with the
actual selling price.
Required 1
Required 2
What is the new target price for each product based on 150% of the new costs under the ABC system? Compare this price
with the actual selling price. (Round your intermediate calculations and final answers to 2 decimal places.)
Product A
$
Product B
< Required 2
.00
Product C
Product C
4
366
46
51
1,850
S
0.00
Total
Overhead
$ 8,300
283,588
462,500
91,000
82,000
$ 847,300
Required 3 >
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Transcribed Image Text:Eastern Chemical Company produces three products. The operating results of the current year are: Actual Price Sales Product Quantity B C 1,858 9,250 925 Target Price $ 381.00 313.60 218.50 Direct materials Direct labor Total prime cost $ The firm sets the target price of each product at 150% of the product's total manufacturing cost. It appears that the firm was able to sell Product Cat a much higher price than the target price of the product and lost money on Product B. Tom Watson, CEO, wants to promote Product C much more aggressively and phase out Product B. He believes that the information suggests that Product C has the greatest potential among the firm's three products because the actual selling price of Product C was almost 50% higher than the target price, while the firm was forced to sell Product B at a price below the target price. 382.88 271.60 326.00 Both the budgeted and actual factory overhead for the current year are $847,300. The actual units sold for each product also are the same as the budgeted units. The firm uses direct labor dollars to assign manufacturing overhead costs. The direct materials and direct labor costs per unit for each product are: Product costs: Product A $66.08 36.00 82.8 Number of setups Weight of direct materials (pounds) Waste and hazardous disposals Quality inspections Utilities (machine hours) Total Difference $1.00 (42.00) $187.50 The controller noticed that not all products consumed factory overhead similarly. Upon further investigation, she identified the following usage of factory overhead during the year: Activity system ABC-based product pricing: Target price Actual selling price Diffe in price Product B $ 130.48 28.08 8.48 Required 3 Complete this question by entering your answers in the tabs below. Product C $ 81.00 18.50 99.50 Product A Product B 3 6 416 266 41 61 46 51 3,700 8,600 Required: 1. Determine the manufacturing cost per unit for each of the products using the volume-based method. 2. What is the least profitable and the most profitable product under both the current and the ABC systems? 3. What is the new torget price for each product based on 150% of the new costs under the ABC system? Compare this price with the actual selling price. Required 1 Required 2 What is the new target price for each product based on 150% of the new costs under the ABC system? Compare this price with the actual selling price. (Round your intermediate calculations and final answers to 2 decimal places.) Product A $ Product B < Required 2 .00 Product C Product C 4 366 46 51 1,850 S 0.00 Total Overhead $ 8,300 283,588 462,500 91,000 82,000 $ 847,300 Required 3 >
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