Preston Piston

a) Unit manufacturing cost of Luxury and Exclusive electric sleeping bags by using the
companys current overhead costing procedures
Luxury Exclusive Total
Direct Material 35 $ 60 $
Direct Labor 20 $ 20 $
Manufacturing Overhead 160 $ 120 $
Unit Cost 215 $ 200 $
Note
Total Manufacturing Ohd 3,080,000 $
Machine Hours 16000 22500 38500
Overhead applied 1,280,000 $ 1,800,000 $
Budgeted Volumes 8000 15000
Overhead per unit 160 $ 120 $
b) Unit manufacturing cost of Luxury and Exclusive electric sleeping bags by using
activity-based costing
Luxury Exclusive Total
Direct Material 35 $ 60 $
Direct Labor 20 $ 20 $
Manufacturing Overhead 189 $ 105 $
Unit Cost 244 $ 185 $
Note
No. of Set ups 50 30 80
Set up Cost 420,000 $ 252,000 $ 672,000 $
Machine Hours 16000 22500 38500
Machine Processing 768,000 $ 1,080,000 $ 1,848,000 $
Outgoing Shipments 100 75 175
Machine Processing 320,000 $ 240,000 $ 560,000 $
Total Overheads 1,508,000 $ 1,572,000 $ 3,080,000 $
Budgeted Volumes 8000 15000
Overhead per unit 189 $ 105 $
c) The market selling price of Luxury Unit 260 $
Less: Discount 30 $
Net Selling Price 230 $
Bottler Tin Company
a) Profitability Statement
Option 1 Option 2
SP per unit 7.50 $ 9.00 $
Fixed Costs 90,000 $ 97,500 $
VC per unit 4.50 $ 4.50 $
Sales Commission per unit 0.75 $ 0.90 $
No. of units 60,000 60,000
Total Revenue 450,000 $ 540,000 $
Less: Variable Costs (270,000) $ (270,000) $
Less: Sales Commission (45,000) $ (54,000) $
Less: Fixed Costs (90,000) $ (97,500) $
Net Income 45,000 $ 118,500 $
b) Variable Cost on additional units 45,000 $
(@ 4.50 per unit for 10,000 units)
Additional Profit 30,000 $
Total Consideration required 75,000 $
No. of units 10,000
Price to be charged per unit 7.50 $
The company shall be incurring a loss by giving this kind of discount, considering
that the unit manufacturing cost as per ABC costing is $244.