Second, SDC has been struggling to maintain its market share of ID. During a recent executive meeting, Jerry Rhodes, the vice president of marketing, made three observations: First, the price of the interior door (ID), a highvolume product for the firm, is often higher than that of competitors’ products. SDC is known for their quality and value, and are often priced lower than competing brands. Its products are sold through industry and wholesale suppliers. As a manager of West Chemical, describe what actions you would take based on the information provided by the activity-based unit costs.ĥ-58 Superior Door Company (SDC) manufactures and sells two main product lines, exterior doors and interior doors. What is the new target price for each product based on 150 percent of the new costs under the ABC system? Compare this price with the actual selling price. What is the least profitable and the most profitable product under both the current and the ABC costing systems? 3. Determine the manufacturing cost per unit for each of the products using the volume-based method. Number of setups Weight of direct materials (pounds) Waste and hazardous disposals Quality inspections Utilities (machine hours) TOTAL Upon further investigation, she identified the following overhead consumption data for 2007: The controller notes that not all of the products consume factory overhead costs similarly. The direct labor and direct d irect materials cost per unit are as follows:ĭirect Materials Direct labor Total prime cost cost) = Budgeted factory overhead = Actual factory overhead incurred =Īctual operating results for 2007 are as follows Product Sales Quantity Target Price A 1,000 $279.00 B 5,000 $294.00 C 500 $199.50 The direct materials materials and direct labor costs per unit for each product are: Target selling price (% of total mfg. The firm uses direct labor dollars d ollars to estimate manufacturing overhead costs. The actual units sold for each product also are the same as the budgeted units. Both the budgeted and actual factory overhead for 2010 are $493,000. He believes that the information suggests that Product C has the greatest potential among the firm's three products since the actual selling price of Product C was almost 50 percent higher than the target price while the firm was forced to sell Product B at a price below the target price. Recognizing that the firm was able to sell Product C at a much higher price than the target price of the product and lost money on Product B, To Watson, CEO, wants to promote Product C much more aggressively and phase out Product Prod uct B. The firm sets the target price of each product at 150% of the product's total manufacturing cost. 5-54 West Chemical Company produces three products.
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