A computer manufacturer produces three types of devices:mobile phones, tablets, and computers. For the production of these three devices you have the following information: Phone Tablet Computer Material cost per unit £90 £140 £315 Direct labor hours per unit 2 2.5 4 Budgeted units 1,500,000 900,000 1,200,000 Labor cost per hour £8 Overhead costs per annum Utilities £20,000,000 Rent £15,000,000 Audit and legal £5,000,000 Administrative staff £40,000,000 Total £80,000,000 ABC analysis suggested that overhead costs are distributed to the three products according to the table below: Overheads Phone Tablet Computer Utilities £8,000,000 £5,000,000 £7,000,000 Rent £8,250,000 £2,250,000 £4,500,000 Audit and legal £2,900,000 £1,250,000 £850,000 Administrative staff £23,200,000 £6,000,000 £10,800,000 For each of the three products, the company aims at a different percentage for profit. Under the full absorption costing method and the targeted profit percentage, the prices of the three products should be: Phone Tablet Computer Full costing price £170.69 £233.87 £435.67 Calculate the aimed profit percentages for the three products and under the full absorption costing method, with overhead costs absorbed on the basis of direct labour hours. Use the profit percentages that you derived in (1) and calculate the prices of the three products under the ABC system.  |
