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

90.2K

Verified Solution

Question

Accounting

Stuart Cameras, Inc. manufactures two models of cameras. ModelZM has a zoom lens; Model DS has a fixed lens. Stuart 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 $ 20.4 $ 9.0
Direct labor 28.8 11.0

Category Estimated Cost Cost Driver Use of Cost Driver
Unit level $ 24,990 Number of units ZM: 2,450 units; DS: 9,450 units
Batch level 44,640 Number of setups ZM: 24 setups; DS: 24 setups
Product level 88,750 Number of TV commercials ZM: 13; DS: 12
Facility level 228,000 Number of machine hours ZM: 400 hours; DS: 800 hours
Total $ 386,380

Stuart’s facility has the capacity to operate 3,600 machine hoursper month.

Required
Compute the cost per unit for each product.
The current market price for products comparable toModel ZM is $121 and for DS is $89. If Stuart sold all of itsproducts at the market prices, what was its profit or loss for theprevious month?
A market expert believes that Stuart can sell as manycameras as it can produce by pricing Model ZM at $116 and Model DSat $40. Stuart 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

4.0 Ratings (476 Votes)

Computation of Allocation Rate as per ABC Costing Model ZM Model DS Activity Overhead a Cost Driver Quantity b Cost driver Allocation Ratecab No of Driver d Cost Allocated cd No of Driver e Cost Allocated ce Unit Level 24990 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Direct Cost per Unit	Model ZM		Model DS
Direct materials	$	20.4	$	9.0
Direct labor		28.8		11.0

Category	Estimated Cost			Cost Driver	Use of Cost Driver
Unit level		$	24,990	Number of units	ZM: 2,450 units; DS: 9,450 units
Batch level			44,640	Number of setups	ZM: 24 setups; DS: 24 setups
Product level			88,750	Number of TV commercials	ZM: 13; DS: 12
Facility level			228,000	Number of machine hours	ZM: 400 hours; DS: 800 hours
Total		$	386,380