Tent Master produces two lines of tents sold to outdoor enthusiasts. The tents are cut to specifications in department A. In department B the tents are sewn and folded. The activities, costs, and drivers associated with these two manufacturing processes and its production support activities follow.
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Additional production information on the two lines of tents follows.
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Required:
1. Using a plant wide overhead rate based on direct labor hours, compute the overhead cost that is assigned to each pup tent and each popup tent.
2. Using the plant wide overhead rate, determine the total cost per unit for the two products if the direct materials and direct labor cost is $ 25 per pup tent and $ 32 per popup tent.
3. If the market price of the pup tent is $ 65 and the market price of the pop-up tent is $ 200, determine the gross profit per unit for each tent. What might management conclude about the pup tent?
4. Using ABC, compute the total cost per unit for each tent if the direct labor and direct materials cost is $ 25 per pup tent and $ 32 per pop-up tent.
5. If the market price is $ 65 per pup tent and $ 200 per popup tent, determine the gross profit per unit for each tent. Comment on the results.
6. Would your pricing analysis be improved if the company used, instead of ABC, departmental rates determined using machine hours in Department A and direct labor hours in Department B?Explain.