Business, 24.02.2020 22:38 emily41950

Silva Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for professional offices. Model Gold is an economical product designed for family use. Jane Silva, the president, is worried about cut-throat price competition in the chairs market. Her company suffered a loss last quarter, an unprecedented event in its history. The company’s accountant prepared the following cost data for Ms. Silva: Direct Cost per Unit Model Diamond (D) Model Gold (G) Direct materials $ 45 per unit $ 30 per unit Direct labor $ 24 /hour × 2 hours production time $ 24 /hour × 1 hour production time Category Estimated Cost Cost Driver Use of Cost Driver Unit level $ 300,000 Number of units D: 15,000 units; G: 35,000 units Batch level 750,000 Number of setups D: 104 setups; G: 146 setups Product level 450,000 Number of TV commercials D: 5; G: 10 Facility level 500,000 Number of machine hours D: 1,500 hours; G: 3,500 hours Total $ 2,000,000 The market price for office chairs comparable to Model Diamond is $180 and to Model Gold is $110. Required Compute the cost per unit for both products. Dan Barker, the chief engineer, told Ms. Silva that the company is currently making 150 units of Model Diamond per batch and 245 units of Model Gold per batch. He suggests doubling the batch sizes to cut the number of setups in half, thereby reducing the setup cost by 50 percent. Compute the cost per unit for each product if Ms. Silva adopts his suggestion.

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Silva Chairs, Inc. makes two types of chairs. Model Diamond is a high-end product designed for profe...

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