Cornerstones of Cost Management – Hansen an Mowen 2nd ed.
Integrated Exercises- Chapters 1 – 4 pg 200 Cable Tech Bell
Cable Tech Bell Corp (CTB) operates in the telecommunications industry. CTB has two divisions: the Phone Division and the Cable Service Division. The Cable Service Division offers three products: a basic package, an enhanced package and a premium package.
The Cable Service Division reported the following activity for the month of March:
Basic Enhanced Premium
Sales(units) 50,000 500,000 300,000
Price per unit 16 30 40
Directly traced 3 5 7
Driver traced 2 4 6
Allocated 10 13 15
The unit costs are divided as follows: 70% production and 30% marketing and customer service. Direct labor cost is the only driver used for tracing. Typically, the division uses only production costs to define unit costs.
1. Compute two different unit costs for each of the Cable Service Division’s products. What managerial objectives are being service by these unit cost computations?
2. Prepare an income statement for the Cable Service Division for March.