Reference no: EM132541157

Shimada Products Corporation of Japan is anxious to enter the electronic calculator market. Management believes that in order to be competitive in world markets, the price of the electronic calculator that the company is developing cannot exceed $15. Shimada's required rate of return is 12% on all investments. An investment of $5,000,000 would be required to purchase the equipment needed to produce the 300,000 calculators that management believes can be sold each year at the $15 price.

Required:

Question 1: Compute the target cost of one calculator

Poskey Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:

Costs:

Wages and salaries ............ $400,000

Depreciation ...................... 160,000

Utilities .............................. 100,000

Total ................................... $660,000

Distribution of resource consumption:

Activity Cost Pools

                                          Assembly        Setting Up           Other          Total

Wages and salaries .............. 40%                    40%               20%         100%

Depreciation ........................ 20%                 35%               45%              100%

Utilities ................................ 25%                  55%               20%        100%

Question 2: How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?