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Category > Accounting Posted 24 Sep 2017 My Price 7.00

Marsh Cameras, Inc.

Target pricing and target costing with ABC

Marsh Cameras, Inc., manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Marsh uses an activity-based costing system. The following are the relevant cost data for the previous month.

Direct Cost per Unit

Model ZM

Model DS

Direct materials

$30

$15

Direct labor

33

12

Category

Estimated Cost

Cost Driver

Use of Cost Driver

Unit level Batch level Product level Facility level

$ 27,000 50,000 90,000 300,000

Number of units Number of setups Number of TV commercials Number of machine hours

ZM. 2,400 units; DS. 9,600 units ZM. 25 setups; DS. 25 setups ZM. 15; DS. 10 ZM. 500 hours; DS. 1,000 hours

Total

$467,000

 

 
           

Marsh’s facility has the capacity to operate 4,500 machine hours per month.

Required

a. Compute the cost per unit for each product.

b. The current market price for products comparable to Model ZM is $146 and for DS is $54. If

Marsh sold all of its products at the market prices, what was its profit or loss for the previous month?

c. A market expert believes that Marsh can sell as many cameras as it can produce by pricing Model ZM at $140 and Model DS at $50. Marsh would like to use those estimates as its target prices and have a profit margin of 20 percent of target prices. What is the target cost for each product?

d. Is there any way for the company to reach its target cost

Answers

Maurice Tutor
(5)
Status NEW Posted 24 Sep 2017 02:09 PM My Price 7.00

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