Gary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes. At the end of the year, Gary needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively Sales Four-Wheelers $1.126.000 Costs Number of employees Maintenance hours IT hours Personal Watercraft Payroll $95,000 2 100 150 $1,416,000 Maintenance 3 $116.000 $250,000 200 Snowmobiles $1,996,000 40 IT 4 150 220 Four-Wheelers Watercraft $850.000 20 1.800 600 $1,156.000 18 750 1.250 Snowmobiles $1,745,000 27 1,300 900
Gary is the operating manager of Crane, a company that manufactures three different types of all-terrain vehicles: four-wheelers, personal watercraft, and snowmobiles. Naturally, Gary has the opportunity to test all of these products for quality-control purposes. At the end of the year, Gary needs to perform a profitability analysis for each product line to better evaluate the company's pricing strategy. He has a gut feeling that the company has room to increase selling prices in the snowmobile category, but he wants to see what the financials look like before he makes a case to the CEO. He has gathered the following information. The costs for the three support departments, Payroll, Maintenance, and IT, are allocated to the product lines according to number of employees, maintenance hours used, and IT hours used, respectively Sales Four-Wheelers $1.126.000 Costs Number of employees Maintenance hours IT hours Personal Watercraft Payroll $95,000 2 100 150 $1,416,000 Maintenance 3 $116.000 $250,000 200 Snowmobiles $1,996,000 40 IT 4 150 220 Four-Wheelers Watercraft $850.000 20 1.800 600 $1,156.000 18 750 1.250 Snowmobiles $1,745,000 27 1,300 900
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 18E
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