Based in the information in this table, The intern suggested splitting the costs, as you have done in the calculations performed in Tab 2, based on sales volumes. Explain the impact of calculation performed in this table. Why the answer has changed from the calculations you performed in Tab 1. Also indicate the benefit of accurate costing when trying to improve operating profit margins.

Question 1
A new intern thinks that the profit for Deluxe Boxes are higher than those calculated using the lump sum method (as in Tab1). The intern suggests calculating the profits using an allocation method for fixed costs based on sales volume( the number of boxes sold) to split the Fixed Costs between the Standard and Deluxe Boxes. Required: (Complete the grey spaces): 1) First calculate the percenatge portion each product has of the total sales voume 1) How much fixed costs are allocated to each product based on the sales volume method suggested by the intern? 2) Also calculate the new operating profit percentage (based on sales) for each product.
	Standard Boxes	Deluxe Boxes	Total
Volumes (per Month)	9	1.5	10.5
Volumes per year (Millions)	108	18	126
Calculate the portion of Sales Volume (percentage sales volume)	86.00	14.00	100.00
Calculate how much fixed costs are allocated to each product.	134.00	22.00	156.00
New Profit Calculation	Standard Boxes ($Millions)	Deluxe Boxes ($Millions)	Total Boxes($ Millions)
Revenue	$ 2,030.00	$ 513.00	2543.00
Subtract Variable Costs	$ 1,080.00	$ 360.00	1100.00
Equals: Contribution Margin	$ 950.40	$ 153.00	1103.40
Subtract Fixed Costs	$ 133.71	$ 22.29	156.00
Equals: Operating Profit	$ 816.69	$ 130.71
Operating Profit % (based on Revenue)	40.22%	25.48%