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Homework answers / question archive / Scott, Inc
Scott, Inc. plans to manufacture scooters for commuters. The company expects to have two models, the "C" and the "R" models. The company will use activity-based costing to apply its estimated $145,000 of overhead costs to its products. Information about its overhead follows:
R Model
Assembly (Labour Hours)
$20,000
10,000
6,000
4,000
Quality control (Inspection Hours)
35,000
2,000
600
1,400
Parts Admin (Number of Parts)
90,000
100
40
60
$145,000
The following cost data is known:
C Model
R Model
Direct Materials
$600
$900
Direct Labour
250
400
Number of units produced
250 units
150 units
The company has not yet determined its planned selling price, but knows that the average price for competitors of the C Model is $1,200. For the R Model, competitors are priced at $1,700 on average.
Required:
a.) Compute the activity rates for each activity.
b.) Determine the expected unit cost of each product.
c.) If Scott, Inc. prices its products in line with competitors, what will the margins be on each product? The largest competitors have gross profit margins of 23%, how does Scott, Inc. compare?
