Question

“See, I told you we made a good decision by introducing the Business and Deluxe chairs. Look at the profits generated by the two chairs that we are sellingat a premium.” These were the words of Linda Badger, CEO of Badger Chair Company (BCC). However, Steve Radcliffe, the VP of operations, did not echoher enthusiasm. “Linda, I must say my people on the shop floor are not too happy with the accounting report. They are still unable to believe that theBusiness and Deluxe chairs made money. According to them the production of these chairs created nothing but problems.” Badger Chair Company makes four different types of chairs: Regular, Standard, Business, and Deluxe. The latter two types of chairs were introduced in2022. The production and sales of each type of chair were as follows during the last two years: Regular Standard Business Deluxe 2021 25,000 25,000 2022 20,000 20,000 5,000 5,000 Price (2022) $ 37.6 $ 45.6 $ 70.6 $ 96.2 BCC uses a normal costing system wherein it traces direct material and direct labour costs to the individual products and allocates overhead costs byapplying predetermined departmental overhead rates to the actual volume of the allocation base pertaining to each department. For 2022, the followingoverhead costs were estimated in each of the two departments: Estimated Overhead Cost and Activity Level Machining department $ 580,000 (206,000 machine-hours) Assembly department $ 625,600 (349,000 direct labour-hours) Consider the following information regarding the actual consumption of resources by each of the four products in 2022: Regular Standard Business Deluxe Machine-hours 91,000 82,000 18,000 15,000 Direct labour-hours 130,000 150,000 30,000 39,000 Prime costs (per unit) $ 17.6 $ 25.4 $ 37.4 $ 42.4 Required: 1. Compute the profitability of each type of chair (please show all the computational steps). 2. In late 2022, Linsey Lindsay, the chief cost accountant, attended a week-long workshop entitled “Advanced Cost Management Methods” offered at a localuniversity. One particular concept she

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