Do not give solution in image Whitaker Company produces two models of blenders for restaurants: the "Super Model" (priced at $395) and the "Special Model" (priced at $200). Recently, Whitaker has been losing market share with its Special Model because of competitors offering blenders with the same quality andfeatures but at a lower price. A careful market study revealed that if Whitaker could reduce the price of its Special Model to $180, it would regain its former share of the market. Management, however, is convinced that any price reduction must be accompanied by a cost reduction of the sameamount so that per-unit profitability is not affected. James Davis, company controller, has indicated that poor overhead costing assignments may be distorting management's view of each product's cost and, therefore, the ability to know how to set selling prices. James has identified thefollowing overhead activities: machining, inspection, and rework. The three activities, their costs, and practical capacities are as follows:Activity CostPractical CapacityMachining $5,398,500 91,500 machine hoursInspection 3,731,000 45,500 inspection hours1,848,000 46,200 rework hoursReworkThe consumption patterns of the two products are as follows:Required:Special100,000UnitsMachine hours50,900Inspection hours10,500Rework hours8,000Whitaker assigns overhead costs to the two products using a plantwide rate based on machine hours.Super26,90040,60035,00038,2001. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required.per unit$Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required.per unitYes ▾Did improving the accuracy of cost assignments solve Whitaker's competitive problem?2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Whitaker has found a new supplier that provides higher-quality componentssuch that inspection and rework costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent) using ABC. The relative consumption patterns also remain the same. Round intermediate calculationsand your final answer to the nearest cent, if rounding is required.per unit

Name: Do not give solution in image Whitaker Company produces two models of
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Description: Do not give solution in image Whitaker Company produces two models of blenders for restaurants: the "Super Model" (priced at $395) and the "Special Model" (priced at $200). Recently, Whitaker has been losing market share with its Special Model becaus

Whitaker Company 1 Machining 5398500 Inspection 3731000 Rework 1848000…

Business

Accounting

Required: 1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required. per unit Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, per unit Did improving the accuracy of cost assignments solve Whitaker's competitive problem? Yes rounding is required. 2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Whitaker has found a new supplier to such that inspection and rework costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent) using ABC. The relative consumption patterns also remain the san and your final answer to the nearest cent, if rounding is required. s per unit

Required: 1. Calculate the unit overhead cost of the Special Model using machine hours to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, if rounding is required. per unit Now, repeat the calculation using ABC to assign overhead costs. Round intermediate calculations and your final answer to the nearest cent, per unit Did improving the accuracy of cost assignments solve Whitaker's competitive problem? Yes rounding is required. 2. Now, assume that in addition to improving the accuracy of cost assignments, James observes that defective supplier components are the root cause of both the inspection and rework activities. Suppose further that Whitaker has found a new supplier to such that inspection and rework costs are reduced by 50 percent. Now, calculate the cost of the Special Model (assuming that inspection and rework times are also reduced by 50 percent) using ABC. The relative consumption patterns also remain the san and your final answer to the nearest cent, if rounding is required. s per unit

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter12: Activity-based Management

Section: Chapter Questions

Problem 6E: Harvey Company produces two models of blenders: the Super Model (priced at 400) and the Special...

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Whitaker Company produces two models of blenders for restaurants: the “Super Model” (priced at $1,600) and the “Special Model” (priced at $800). Recently, Whitaker has been losing market share with its Special Model because of competitors offering blenders with the same quality and features but at a lower price. A careful market study revealed that if Whitaker could reduce the price of its Special Model to $750, it would regain its former share of the market. Management, however, is convinced that any price reduction must be accompanied by a cost reduction of the same amount so that per-unit profitability is not affected. Jame Davis, company controller, has indicated that poor overhead costing assignments may be distorting management’s view of each product’s cost and, therefore, the ability to know how to set selling prices. James has identified the following overhead activities: machining, inspection, and rework. The three activities, their costs, and practical capacities are as…
Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice President for Marketing at QC, concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors. QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495. Winters determined that a price drop to $495 would be necessary to regain market share and reach a targeted annual sales level of 10,000 chairs.Cost data based on sales of 10,000 chairs: Budgeted Quantity Actual Quantity Actual Cost Direct materials (board feet) 88,000 79,500 $ 1,250,000 Direct labor (hours) 71,350 73,775 875,000 Machine hours (hours) 11,400 11,250 250,000 Finishing and packing (hours) 6,500 6,400 125,000 In order to reduce costs so as to reach the desired target cost, Quality Chairs should also focus on reducing the cost of: Multiple Choice Mechanical…
Harvey Company produces two models of blenders: the “Super Model” (priced at $400) and the “Special Model” (priced at $200). Recently, Harvey has been losing market share with its Spe-cial Model because of competitors offering blenders with the same quality and features but at a lower price. A careful market study revealed that if Harvey could reduce the price of its Special Model to $180, it would regain its former share of the market. Management, however, is con-vinced that any price reduction must be accompanied by a cost reduction of the same amount so that per-unit profitability is not affected. Earl Wise, company controller, has indicated that pooroverhead costing assignments may be distorting management’s view of each product’s cost and,therefore, the ability to know how to set selling prices. Earl has identified the following overheadactivities: machining, inspection, and rework. The three activities, their costs, and practicalcapacities are as follows: Activity Cost…
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