The following information is for a product manufactured and sold by Rivera Corporation

Price: $4.99


Question 1: The following information is for a product manufactured and sold by Rivera Corporation:

• Sales price per unit, $30
• Variable cost per unit, $20
• Total fixed costs, $200,000
• Last year, Rivera earned a profit of $60,000
Required:

1) How many units did Rivera sell last year

2) Rivera's managers are considering decreasing the sales price to $28 in an effort to increase market share. Also, the company wants a profit of $80,000. How many units would it have to sell at the lower selling price to achieve this target?

Question 2: The management accountant at Melrose, Inc. provided the following estimated costs for producing 5,000 units of a specialty product manufactured by the firm:

Direct materials 10000

Direct labor (1 hour per unit) 50000

Unit level support costs 10000

Batch level support costs 5000

Product level support costs 3000

Facility level support costs 7000

1) Compute the predetermined overhead rate for this company.

2) Compute the specialty product's total estimated cost per unit.

3) Why do firms assign overhead costs using a predetermined overhead rate instead of
assigning actual costs?