Baird Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of the year (during which Baird made 68,000 tennis racquets and 29,800 badminton racquets). Direct Cost Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Estimated Cost $ 728,000 256,000 157,500 744,000 $ 1,885,500 Tennis Racquet (TR) $ 20.10 per unit 33.50 per unit Badminton Racquet (BR) $13.50 per unit 27.70 per unit Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 14,800 hours; BR: 11,200 hours TR: 78 setups; BR: 50 setups TR: 4; BR: 1 TR: 31,200 hours; BR: 30,800 hours Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment. Required a. Compute the cost per unit for each product. b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
Baird Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make both products even though the processes are quite different. The company has recently converted its cost accounting system to activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of the year (during which Baird made 68,000 tennis racquets and 29,800 badminton racquets). Direct Cost Direct materials Direct labor Category Unit level Batch level Product level Facility level Total Estimated Cost $ 728,000 256,000 157,500 744,000 $ 1,885,500 Tennis Racquet (TR) $ 20.10 per unit 33.50 per unit Badminton Racquet (BR) $13.50 per unit 27.70 per unit Cost Driver Number of inspection hours Number of setups Number of TV commercials Number of machine hours Amount of Cost Driver TR: 14,800 hours; BR: 11,200 hours TR: 78 setups; BR: 50 setups TR: 4; BR: 1 TR: 31,200 hours; BR: 30,800 hours Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected. Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the quarter. Facility-level cost includes depreciation of all production equipment. Required a. Compute the cost per unit for each product. b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
Chapter1: Financial Statements And Business Decisions
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Baird Sporting Goods Corporation makes two types of racquets, tennis and badminton. The company uses the same facility to make
both products even though the processes are quite different. The company has recently converted its cost accounting system to
activity-based costing. The following are the cost data that Jane Price, the cost accountant, prepared for the third quarter of the year
(during which Baird made 68,000 tennis racquets and 29,800 badminton racquets).
Direct Cost
Direct materials
Direct labor
Category
Unit level
Batch level
Product level
Facility level
Total
Estimated
Cost
$ 728,000
256,000
157,500
744,000
$
1,885,500
Tennis Racquet (TR)
$ 20.10 per unit
33.50 per unit
Badminton Racquet (BR)
$13.50 per unit
27.70 per unit
Cost Driver
Number of inspection hours
Number of setups
Number of TV commercials
Number of machine hours
Amount of Cost Driver
TR: 14,800 hours; BR: 11,200 hours
TR: 78 setups; BR: 50 setups
TR: 4; BR: 1
TR: 31,200 hours; BR: 30,800 hours
Inspectors are paid according to the number of actual hours worked, which is determined by the number of racquets inspected.
Engineers who set up equipment for both products are paid monthly salaries. TV commercial fees are paid at the beginning of the
quarter. Facility-level cost includes depreciation of all production equipment.
Required
a. Compute the cost per unit for each product.
b. If management wants to price badminton racquets 30 percent above cost, what price should the company set?
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