Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen

تمرين 34

ABC VERSUS ABM
Fresco, Inc., produces elite (priced at $300) and supreme juicers (priced at $180). Recently, Fresco has been losing market share with its supreme juicers because of competitors offering juicers with the same quality and features but at a lower price. A careful market study revealed that if Fresco could reduce the price of its supreme juicer to $170, it would regain its former share of the market. Management, however, is convinced that any price reduction must be accompanied by a cost reduction of the same amount so that per-unit profitability is not affected. Charles McManus, company controller, has indicated that poor overhead costing assignments may be distorting management's view of each product's cost and, therefore, the ability to know how to set selling prices. Charles has identified the following overhead activities: assembly, inspection, and rework. The three activities, their costs, and practical capacities are as follows:

The consumption patterns of the two products are as follows:

Fresco assigns overhead costs to the two products using a plantwide rate based on direct labor (assembly) hours.