Purchase Solution

# This addresses the Tiger Pride profitability exercise.

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Tiger Pride produces two product lines: T-Shirts and Sweatshirts. Product profitability is analyzed as follows:

T-SHIRTS SWEATSHIRTS
Production & Sales Volume - Units 60,000 35,000
Selling Price \$16.00 \$29.00
Direct Materials \$2.00 \$5.00
Direct Labor \$4.50 \$7.20
Manufacturing Ohd \$2.00 \$3.00
Gross Profit \$7.50 \$13.80
Operating Profit \$3.50 \$6.80

Tiger Pride's managers have decided to revise their current assignment of overhead costs to reflect the following ABC cost information:
Activity Activity Cost Cost Driver
Supervision \$100,920 Direct Labor Hours
Inspection \$124,000 Inspections
ACTIVTIES DEMANDED:
T-SHIRTS SWEATSHIRTS
.75 DLH/Unit 1.2 DLH/Unit
45,000 DLHs 42,000 DLHs
60,000 Inspections 17,500 Inspections

18. Under the revised ABC system, total overhead costs allocated to Sweatshirts will be:

a \$48,720
b \$76,720
c \$224,920
d None of the answers are correct.

19. Under the revised ABC system, overhead cost per unit for the Sweatshirts will be:

a \$1.39 per unit
b \$1.60 per unit
c \$2.19 per unit
d \$2.47 per unit

20. Using an ABC system, next year's estimates show manufacturing overhead costs will total \$228,300 for 52,000 T-Shirts. If all other T-shirt costs and sales prices remain the same, the profitability that can be expected is:

a \$5.41 per T-shirt.
b \$4.39 per T-shirt.
c \$1.11 per T-shirt.
d (\$0.81) per T-Shirt

##### Solution Summary

This solution provides the correct answers and calculations to the Tiger Pride exercise.

##### Solution Preview

18. b \$76,720

\$124,000 / (60,000 + 17,500) = \$1.60 x 17,500= \$28,000 + ...

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