Question

Rooney Chairs, Inc, 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 Coat PA Unit Direot materials Direct labor Model Diamond $19.60 per unit $18.90/hour. 2.00 hours production del Gold (9) $9.60 per unit HS.90/hour 00 hour production time Category Unit laval Batch Level Product level Paenity level Total Latimated Coat SJ03,800 720,000 600,000 624,000 $2,247,800 Coat Driver Number of units Number of setup Number of TV commercials Number of machine hours H oe of Cost Driver HIDE 13.000 LEI 36.000 unite 112 setupa: 10 stup ZAG:17 DI R800 hour 400 The market price for office chairs comparable to Model Diamond is $118 and to Model Gold is $75, 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 116 units of Model Diamond per batch and 191 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 Type of Product a. Model Diamond Model Gold Model Diamond

Answer 1

Category CD8+ Pleves No 4 uniti anet leven use a alime 49.000 ABC Rote $6.2 8 203,800 Reach level 300 $ 2400 Riddict Ruel Facility levu & #20,000 $600.000 $624.000 Nog setups NOO TV comm NO 9 Mach How $ 25,000 5200 $ 120 Particula unit lever Diamond $80.600 (13.000 x $62) Gold $223,200 ( 36.000 x862) Botch level $ 268,800 (112*$2400) $451,200 ( 188 * $ 2400) $425.000 (1** $25.000) poduct level $175.000 (#*$ 25,000) facility kvel $216.000 (1800 x $120) $ 408,000 ( 3400 x $ 120) $40 400 $ 1,507,400 12,992 No. of unite Puoduced 85.908 (191x188) (112x 116) $41.98 cost per unit $ 56.99 Cost percenir Diect materia puer label $19.60 $ 8780 $ 56.99 8960 18.90 $41.98 Over head $114.39 $70.48

(6) Particulan Batch level cost Diamond $134,400 (56 * $ 2400) Gold $295,600 (94% $2400) Total Overhead cost $ 606,000 $ 1,281,800 OH cost per unit $ 46.64 $19.60 pueer mallu'on Ducer laba $35.70 $9.60 $18.90 $ 37.80 $104.04 $64.2 Cost pee unit Type of puoduce $ 114:39 7048 a) Model Diamond Model Gold b) Model Diamond Model Gold $ 104.04 $ 64.20