Reference no: EM132753931

Rundle Cameras, Inc. manufactures two models of cameras. Model ZM has a zoom lens; Model DS has a fixed lens. Rundle uses an activity-based costing system. The following are the relevant cost data for the previous month:

Direct Cost per Unit           Model ZM           Model DS

Direct materials                $20.10            $9.00
Direct labor                      28.20             11.00

Category Estimated Cost                       Cost Driver                  Use of Cost Driver

Unit level $24,990 Number of units ZM: 2,400 units;               DS: 9,500 units
Batch level 43,200 Number of setups ZM:     24 setups;             DS: 24 setups
Product level 88,750 Number of TV commercials   ZM: 13;               DS: 12
Facility level 228,000 Number of machine hours        ZM: 400 hours;        DS: 800 hours
Total $384,940

Rundle's facility has the capacity to operate 3,600 machine hours per month.

Required

Problem 1: Compute the cost per unit for each product.

Problem 2: The current market price for products comparable to Model ZM is $120 and for DS is $86. If Rundle sold all of its products at the market prices, what was its profit or loss for the previous month?

Problem 3: A market expert believes that Rundle can sell as many cameras as it can produce by pricing Model ZM at $115 and Model DS at $40. Rundle would like to use those estimates as its target prices and have a profit margin of 30 percent of target prices. What is the target cost for each product?