Silva Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is aneconomical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairsmarket. Her company suffered a loss last quarter, an unprecedented event in its history. The company's accountant prepared thefollowing cost data for Ms. Silva:Direct Cost per UnitModel Diamond (D)$45 per unit$24/hour x 2 hours production timeModel Gold (G)$30 per unit$24/hour x 1 hour production timeDirect materialsDirect laborEstimated CostCost DriverUse of Cost DriverCategoryUnit levelNumber of units300,000750,000450,000500,000D: 15,000 units; G: 35,000 unitsD: 104 setups; G: 146 setupsD: 5; G: 10D: 1,500 hours; G: 3,500 hoursBatch levelNumber of setupsProduct levelNumber of TV commercialsFacility levelNumber of machine hours$2,000,000TotalThe market price for office chairs comparable to Model Diamond is $180 and to Model Gold is $110.Requireda. Compute the cost per unit for both products.b. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 150 units of Model Diamond per batch and 245units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setupcost 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.)Type of ProductCost Per Unita. Model DiamondModel Goldb. Model Diamondodel Gold

Total costs are the sum of costs required to produce a product. And the cost per unit is the sum of…

Silva 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: Model Diamond (D) $45 per unit $24/hour x 2 hours production time Direct Cost per Unit Model Gold (G) Direct materials $30 per unit $24/hour × 1 hour production time Direct labor Estimated Cost Cost Driver Number of units Number of setups Use of Cost Driver Category Unit level $ 300,000 750,000 450,000 500,000 D: 15,000 units; G: 35,000 units D: 104 setups; G: 146 setups D: 5; G: 10 D: 1,500 hours; G: 3,500 hours Batch level Product level Number of TV commercials Facility level Number of machine hours Total $2,000,000 The market price for office chairs comparable to Model Diamond is $180 and to Model Gold is $11O. 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 150 units of Model Diamond per batch and 245 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.)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 34P: Kimball Company has developed the following cost formulas:...