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Bevans Co. makes two products, product X and product Y.

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Bevans Co. makes two products, product X and product Y. Bevans has produced product X for many years without generating any hazardous waste. Recently, Bevans developed product Y, which is superior to product X. However, product Y generates hazardous wastes.;Bevans Co. uses a cost driver rate based on machine hours to assign manufacturing support costs to its two products. Because of concerns about the accuracy of the product costing system, the conroller, undertook and activity-based analysis of the manufacuring support cost. The summary is below;Product X Product Y;Direct Cost $9,000,000 $4,000,000;Unit Level support $2,000,000 $1,000,000;Batch support $15,000,000 $20,000,000;Product support $5,000,000 $8,000,000;Environmental supp. 0 $14,000,000;Total machine hrs 10,000,000 6,000,000;Number of units 100,000,000 40,000,000;A) compute product cost per unit for products X and Y using the current cost driver rate based on machine hours for manufacturing support cost;B) compute product cost per unit for products X and Y using the activity-based costing figures provided in the table;C) briefly explain the difference;D) Bevans has been selling products X and Y at a price equal to 1.5 times the product cost computed using the machine-hour cost driver for manufacturing support cost. Compute these prices and provide recommencdations to Bevans' management concering profit improvement through pricing changes and cost reduction through manufacturing improvements

 

Paper#32346 | Written in 18-Jul-2015

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