Regal Kitchens,Inc Regal Uses the Following Activity-Based Costs The Company's Desired Profit Is 25 Percent Over Total Production

Essay

Regal Kitchens,Inc.,is considering the production of a new kitchen vent system.The Marketing Department has determined that there would be demand for the product at or below a selling price of $150 per unit.Anticipated unit costs are as follows:
$\begin{array}{lr}\text {Direct materials}& \$ 26.00 \\\text {Direct labor costs}\\\text {Manufacturing}\\ \text { Hours } & 2.2 \\\text { Hourly rate } & \$ 12.00 \\\text { Assembly } &\\\text {Hours}&2.5\\\text {Hourly rate}&\$10.00\\\text {Machine hours}&2\end{array}$

Regal uses the following activity-based costs:
$\begin{array}{ll}\text { Materials handling } & 120 \% \text { of direct material } \\\text { Production } & \$ 7.00 \text { per machine hour } \\\text { Shipping and handling } & \$ 10 \text { per unit }\end{array}$
The company's desired profit is 25 percent over total production and shipping costs.
Calculate the target cost for this product and determine whether or not it should be produced.