Herbert Love Corporation produces two products: A and B. The annual production and sales level of Product
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Herbert Love Corporation produces two products: A and B. The annual production and sales level of Product A is 32,000 units. The annual production and sales level of the premium Product B is 18,000. Currently, the company uses traditional costing and the total overheads of ₹525,00,000 are apportioned on the basis on Direct Labour Hours.
The following information is also available:
Product A B
Sales price per unit ₹3500 ₹3800
Direct material per unit ₹1500 ₹1800
Direct labor per unit ₹400 ₹500
Direct Labour Hours 8000 2000
The sales of Product B are increasing but alarmingly the overall profits of the company are declining. The management accounting of the company advises to use activity-based costing. Calculate profit under each product line.
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