Perez Cameras, Inc. manufactures two models of cameras. Model ZMhas a zoom lens; Model DS has a fixed lens. Perez uses anactivity-based costing system. The following are the relevant costdata for the previous month:
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| Direct Cost per Unit | Model ZM | Model DS |
| Direct materials | $ | 20.9 | | $ | 7.0 | |
| Direct labor | | 29.8 | | | 9.0 | |
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| Category | Estimated Cost | Cost Driver | Use of Cost Driver |
| Unit level | | $ | 25,960 | | | Number of units | ZM: 2,350 units; DS: 9,450 units |
| Batch level | | | 50,960 | | | Number of setups | ZM: 26 setups; DS: 26 setups |
| Product level | | | 90,000 | | | Number of TV commercials | ZM: 14; DS: 11 |
| Facility level | | | 180,000 | | | Number of machine hours | ZM: 300 hours; DS: 600 hours |
| Total | | $ | 346,920 | | | | |
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Perez’s facility has the capacity to operate 2,700 machine hoursper month.
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Required
Compute the cost per unit for each product.
The current market price for products comparable toModel ZM is $119 and for DS is $66. If Perez sold all of itsproducts at the market prices, what was its profit or loss for theprevious month?
A market expert believes that Perez can sell as manycameras as it can produce by pricing Model ZM at $114 and Model DSat $34. Perez would like to use those estimates as its targetprices and have a profit margin of 30 percent of target prices.What is the target cost for each product?
