Perez Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS...

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Accounting

Perez Cameras, Inc. manufactures two models of cameras. Model ZMhas a zoom lens; Model DS has a fixed lens. Perez uses anactivity-based costing system. The following are the relevant costdata for the previous month:

Direct Cost per Unit Model ZM Model DS
Direct materials $ 20.9 $ 7.0
Direct labor 29.8 9.0

Category Estimated Cost Cost Driver Use of Cost Driver
Unit level $ 25,960 Number of units ZM: 2,350 units; DS: 9,450 units
Batch level 50,960 Number of setups ZM: 26 setups; DS: 26 setups
Product level 90,000 Number of TV commercials ZM: 14; DS: 11
Facility level 180,000 Number of machine hours ZM: 300 hours; DS: 600 hours
Total $ 346,920

Perez’s facility has the capacity to operate 2,700 machine hoursper month.

Required
Compute the cost per unit for each product.
The current market price for products comparable toModel ZM is $119 and for DS is $66. If Perez sold all of itsproducts at the market prices, what was its profit or loss for theprevious month?
A market expert believes that Perez can sell as manycameras as it can produce by pricing Model ZM at $114 and Model DSat $34. Perez would like to use those estimates as its targetprices and have a profit margin of 30 percent of target prices.What is the target cost for each product?

Answer & Explanation Solved by verified expert

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1 Product Direct materials Direct labor Allocated Overhead Total Cost Model ZM 209 298 6002 11072 Model DS 70 90 2179 3779 Working Category Estimated Cost Cost Driver Usage Allocation Rate Model ZM Model DS Cost Driver Cost Cost See Answer

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Direct Cost per Unit	Model ZM		Model DS
Direct materials	$	20.9	$	7.0
Direct labor		29.8		9.0

Category	Estimated Cost			Cost Driver	Use of Cost Driver
Unit level		$	25,960	Number of units	ZM: 2,350 units; DS: 9,450 units
Batch level			50,960	Number of setups	ZM: 26 setups; DS: 26 setups
Product level			90,000	Number of TV commercials	ZM: 14; DS: 11
Facility level			180,000	Number of machine hours	ZM: 300 hours; DS: 600 hours
Total		$	346,920