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Solomon Chairs, Incorporated makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Show Transcribed Text Model Diamond (D) $ 20.20 per unit $17.60/hour x 2.00 hours production time Type of Product Estimated Cost Number of units Number of setups $ 255,000 975,000 546,000 Number of TV commercials 644,000 Number of machine hours $ 2,420,000 a. Model Diamond a. Model Gold b. Model Diamond b. Model Gold Cost Driver The market price for office chairs comparable to Model Diamond is $119 and to Model Gold is $73. Model Gold (G) $10.90 per unit $17.60/hour x 1.00 hour production time Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 160 units of Model Diamond per batch and 229 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. (For all requirements, round intermediate calculations and final answers to 2 decimal places.) Cost per Unit Use of Cost Driver D: 17,000 units; G: 33,000 units D: 106 setups; G: 144 setups D: 6; G: 15 D: 1,500 hours; G: 3,100 hours

Solomon Chairs, Incorporated makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Show Transcribed Text Model Diamond (D) $ 20.20 per unit $17.60/hour x 2.00 hours production time Type of Product Estimated Cost Number of units Number of setups $ 255,000 975,000 546,000 Number of TV commercials 644,000 Number of machine hours $ 2,420,000 a. Model Diamond a. Model Gold b. Model Diamond b. Model Gold Cost Driver The market price for office chairs comparable to Model Diamond is $119 and to Model Gold is $73. Model Gold (G) $10.90 per unit $17.60/hour x 1.00 hour production time Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 160 units of Model Diamond per batch and 229 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. (For all requirements, round intermediate calculations and final answers to 2 decimal places.) Cost per Unit Use of Cost Driver D: 17,000 units; G: 33,000 units D: 106 setups; G: 144 setups D: 6; G: 15 D: 1,500 hours; G: 3,100 hours

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 2CMA: The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the...
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Solomon Chairs, Incorporated makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Show Transcribed Text Model Diamond (D) $ 20.20 per unit $17.60/hour x 2.00 hours production time Type of Product Estimated Cost $ 255,000 975,000 546,000 644,000 $ 2,420,000 a. Model Diamond a. Model Gold b. Model Diamond b. Model Gold Cost Driver The market price for office chairs comparable to Model Diamond is $119 and to Model Gold is $73. Number of units. Number of setups Number of TV commercials. Number of machine hours. Cost per Unit Model Gold (G) $10.90 per unit. $17.60/hour x 1.00 hour production time Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 160 units of Model Diamond per batch and 229 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. (For all requirements, round intermediate calculations and final answers to 2 decimal places.) Use of Cost Driver D: 17,000 units; G: 33,000 units D: 106 setups; G: 144 setups D: 6; G: 15 D: 1,500 hours; G: 3,100 hours
Transcribed Image Text:Solomon Chairs, Incorporated makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Show Transcribed Text Model Diamond (D) $ 20.20 per unit $17.60/hour x 2.00 hours production time Type of Product Estimated Cost $ 255,000 975,000 546,000 644,000 $ 2,420,000 a. Model Diamond a. Model Gold b. Model Diamond b. Model Gold Cost Driver The market price for office chairs comparable to Model Diamond is $119 and to Model Gold is $73. Number of units. Number of setups Number of TV commercials. Number of machine hours. Cost per Unit Model Gold (G) $10.90 per unit. $17.60/hour x 1.00 hour production time Required a. Compute the cost per unit for both products. b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 160 units of Model Diamond per batch and 229 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion. (For all requirements, round intermediate calculations and final answers to 2 decimal places.) Use of Cost Driver D: 17,000 units; G: 33,000 units D: 106 setups; G: 144 setups D: 6; G: 15 D: 1,500 hours; G: 3,100 hours
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