Stuart Cameras, Inc. manufactures two models of cameras. ModelZM has a zoom lens; Model DS has a fixed lens. Stuart 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 | $ | 20.4 | | $ | 9.0 | |
| Direct labor | | 28.8 | | | 11.0 | |
|
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| Category | Estimated Cost | Cost Driver | Use of Cost Driver |
| Unit level | | $ | 24,990 | | | Number of units | ZM: 2,450 units; DS: 9,450 units |
| Batch level | | | 44,640 | | | Number of setups | ZM: 24 setups; DS: 24 setups |
| Product level | | | 88,750 | | | Number of TV commercials | ZM: 13; DS: 12 |
| Facility level | | | 228,000 | | | Number of machine hours | ZM: 400 hours; DS: 800 hours |
| Total | | $ | 386,380 | | | | |
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Stuart’s facility has the capacity to operate 3,600 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 $121 and for DS is $89. If Stuart sold all of itsproducts at the market prices, what was its profit or loss for theprevious month?
A market expert believes that Stuart can sell as manycameras as it can produce by pricing Model ZM at $116 and Model DSat $40. Stuart 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?
