Problem 1:

Mathias Company manufactures a number of specialized machine parts. Part Bunkka-22 uses $35 of direct materials and $15 of direct labor per unit.

Mathias’ estimates manufacturing overhead is as follows:

Overhead is applied based on direct labor costs, which were estimated at $200,000.

Mathias is considering adopting activity-based costing. The cost drivers are estimated at:

1. Compute the cost of 1,000 units of Bunkka-22 using the current traditional costing system.
2. Compute the cost of 1,000 units of Bunkka-22 using the proposed activity-based costing system. Assume the 1,000 units use 2,500 pounds of materials, 500 machine hours, and 1,000 direct labor hours.

Problem 2:

In the month of March, New Day Spa services 570 clients at an average price of $120. During the month, fixed costs were $21,000 and variable costs were 65% of sales.

1. Determine the contribution margin in dollars, per unit, and as a ratio.
2. Using the contribution margin technique, compute the break-even point in dollars and in units.