# Consider the following data for two products

Consider the following data for two products

MGMT 312,

III.

Module 3 Review Questions

Stephen Wainscott
18 April 2014

Using ABC for strategic decisions

Consider the following data for two products of Vigano Manufacturing.

1) Using direct labor hours as the basis for assigning overhead costs, determine the
total production cost per unit for each product line.
2) If the market price for Product A is \$20 and the market price for Product B is \$60,
determine the profit or loss per unit for each product. Comment on the results.
3) Consider the following additional information about these two product lines. If
ABC is used for assigning overhead costs to products, what is the cost per unit
for Product A and for Product B?

4) Determine the profit or loss per unit for each product. Should this information
influence company strategy? Explain.

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MGMT 312,
IV.

Module 3 Review Questions

Stephen Wainscott
18 April 2014

Using ABC in a service company

Singh and Smythe is an architectural firm that provides services for residential
construction projects. The following data pertain to a recent reporting period.

1. Using ABC, compute the firmâs activity overhead rates. Form activity cost pools
where appropriate.
2. Assign costs to a 9,200 square foot job that requires 450 contact hours, 340
design hours, and 200 days to complete.

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MGMT 312,
V.

Module 3 Review Questions

Stephen Wainscott
18 April 2014

Evaluating product line costs and prices using ABC

Healthy Day Company produces two beverages, PowerPunch and SlimLife. Data about
these products follow.

Additional data from its two production departments follow:

1. Determine the cost of each product line using ABC.
2. What is the cost per bottle for PowerPunch? What is the cost per bottling of
SlimLife? (Hint: Your answer should draw on the total cost for each product line
computed in requirement 1.)
3. If PowerPunch sells for \$3.75 per bottle, how much profit does the company earn
per bottle of PowerPunch that it sells?
4. What is the minimum price that the company should set per bottle of SlimLife?
Explain.

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