Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2010, Come-On-In compiled the following data for the two products:
Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2010:
Required:
a. Using the current system, what is the estimated
b. Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit)than the standard door ($120 per unit). What is a likely explanation for this?
c. Review the machine-related costs above. What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours)are the same as for the standard doors (300,000 hours)?
d. Using the activity-based costing data presented above,
e. Is the deluxe door as profitable as the original data estimated? Why or why not?
f. What considerations need to be examined when determining a sales mix strategy?

Question

Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2010, Come-On-In compiled the following data for the two products:
   Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2010:
  Required:
a. Using the current system, what is the estimated
  b. Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit)than the standard door ($120 per unit). What is a likely explanation for this?
c. Review the machine-related costs above. What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours)are the same as for the standard doors (300,000 hours)?
d. Using the activity-based costing data presented above,
  e. Is the deluxe door as profitable as the original data estimated? Why or why not?
f. What considerations need to be examined when determining a sales mix strategy?

Quizplus · Accepted Answer

The Answer of Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2010, Come-On-In compiled the following data for the two products:
   Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2010:
  Required:
a. Using the current system, what is the estimated
  b. Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit)than the standard door ($120 per unit). What is a likely explanation for this?
c. Review the machine-related costs above. What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours)are the same as for the standard doors (300,000 hours)?
d. Using the activity-based costing data presented above,
  e. Is the deluxe door as profitable as the original data estimated? Why or why not?
f. What considerations need to be examined when determining a sales mix strategy?

Come-On-In Manufacturing Produces Two Types of Entry Doors: Deluxe and Standard