Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to protect its market share and maintain an annual sales level of 13,000 workbenches.
Cost data based on sales of 13,000 workbenches:
$\begin{array}{lccc}
&\begin{array}{c}
\text { Budgeted } \
\text { Quantity }
\end{array} & \begin{array}{c}
\text { Actual } \
\text { Quantity }
\end{array} &\text { Actual Cost} \
\text { Direct materials (pounds) } & 175,000 & 168,000 & \$ 3,450,000 \
\text { Direct labor (hours) } & 72,800 & 71,500 & 825,000 \
\text { Machine setups (no. of setups) } & 900 & 880 & 250,000 \
\text { Mechanical assembly (machine hours) } & 273,000 & 281,250 & 3,750,000
\end{array}$The current cost per unit is (rounded to the nearest whole dollar):
A) $588.
B) $523.
C) $465.
D) $637.
E) $445.

Question

Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to protect its market share and maintain an annual sales level of 13,000 workbenches.
Cost data based on sales of 13,000 workbenches:
$\begin{array}{lccc}
&\begin{array}{c}
\text { Budgeted } \
\text { Quantity }
\end{array} & \begin{array}{c}
\text { Actual } \
\text { Quantity }
\end{array} &\text { Actual Cost}  \
\text { Direct materials (pounds) } & 175,000 & 168,000 & \$ 3,450,000 \
\text { Direct labor (hours) } & 72,800 & 71,500 & 825,000 \
\text { Machine setups (no. of setups) } & 900 & 880 & 250,000 \
\text { Mechanical assembly (machine hours) } & 273,000 & 281,250 & 3,750,000
\end{array}$The current cost per unit is (rounded to the nearest whole dollar):
A) $588.
B) $523.
C) $465.
D) $637.
E) $445.

Quizplus · Accepted Answer

The total actual cost is the sum of all actual costs provided: $3,450,000 (Direct materials) + $825,000 (Direct labor) + $250,000 (Machine setups) + $3,750,000 (Mechanical assembly) = $8,275,000. To find the cost per unit, divide the total cost by the number of units (13,000 workbenches): $8,275,000 / 13,000 = $636.54, which rounds to $637.

Quality Industries Manufactures Large Workbenches for Industrial Use The Current Cost Per Unit Is (Rounded to the Nearest