Question:
A computer manufacturer produces 3 types of product devices. Mobile phones tablets and computers for the production these three devices you have the following information.
phone 90$ tablet 140 $ computer315$ these are material cost, direct labour cost per unit phone 2 tablet 2.5 computer 4, budgeted unit phone(NNN) NNN-NNNN tablet(NNN) NNN-NNNN computer(NNN) NNN-NNNN labour per unit = 8$
overhead cost per annum.
utilities 20,000,000,rent 15,000,000, audit and legal 5,000,000, administrative staff40,000,000 all in dollars total 80,000,000
ABC analysis suggest that overhead cost are distributed to the three products according to below information overhead
utilities= 80,000,000, Rent =8,250,000, audit and legal=(NNN) NNN-NNNN Administrative staff23200000 for phone. utilities=5,000,000
Rent=2,250.000,Audit and legal=1,250.000 Administrative staff=6.000.000 for Tablet, Utilities=7,000,000, Rent =4500.000,Audit and legal =850.000, Administrative staff=10.800.000 for Computer.
for each of the 3 products the company aims at a different percentage for profit under the full absorption costing method and the targeted profit percentage the prices of the 3 products should be
full costing = phone 170.69, tablet = 233.87, computer=435.67
1. Calculate the aimed profit percentage for the 3 products and under the full absorption costing method with overhead cost absorbed on the basis of direct labour hours
2. Use the profit percentages that you derive in (1) and calculate the prices of the 3 products under the ABC system.
Recommend a cost system and include any changes that you would suggest to the pricing strategy of the computer company.