Orange Inc. manufactures a product line that requires materials costing P35 for each unit of product. Four units of product are produced each labor hour at a labor rate of P40 per hour. Variable manufacturing overhead has been budgeted at P8 per hour and fixed manufacturing overhead has been budgeted at P600,000 for the year. In a good year, the company can produce and sell 60,000 units or product. Normally only 50,000 units are produced and sold each year. If the market is weak, the company may produce and sell only 40,000 units.

Required: Compute for the following:

1. Product unit cost if 50,000 units are to be manufactured each year.
2. Product unit cost if 60,000 units are to be manufactured each year.
3. Product unit cost if 40,000 units are to be manufactured each year.
4. Compute for the gross profit per unit under the three activity levels assuming that the product is sold at P100 per unit.

Answer rating: 100% (QA)

To compute the product unit cost and gross profit per unit under different activity levels we need t... View the full answer