I spend half my time trying to figure out these accounting reports, said Paul Hribar in total frustration. He was trying to figure out whether

€œI spend half my time trying to figure out these accounting reports,€ said Paul Hribar in total frustration. He was trying to figure out whether to introduce a new product and was referring to the latest €œProduct Cost Estimate€ he had received from accounting. He thinks the report is wrong. He argues that €œNo one will be hired or fired in accounting if I add or do not add this product. But I am being charged for the accounting department€™s costs and am expected to recover it in the product price. How can this make sense?€

Required:
Explain why the product cost report contains allocations for manufacturing and SG&Aoverhead.

Product Cost Sheet (Estimate) Model Number: KX-245/R2 0,000 80.00 Number of units Estimated unit Materials cost Labor cost (1 hour $22/labor hour) Variable factory overhead (@$7 per machine hour) Materials handling (10% of materials cost) Other factory costs (150% of labor cost) Total factory cost Gross margin Variable s Fixed selling costs (5% ofprice) Total selling costs Net profif $13.00 S22.00 S10.50 S1.30 S33.00 79.80 S0.20 S6.45 $4.00 costs 10.45 ($10.25)