Bob manufactures and sells two products. He provides the following information. Product A Product B 2000...

  

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Bob manufactures and sells two products. He provides the following information. Product A Product B 2000 units 3000 units Monthly sales $8 Direct material cost per unit Direct labour cost per unit $10 Selling price per unit $29 The total overheads for the month are as follows. Rent Machine set-up costs Packaging Quality inspections $ 42000 $12 $11 $46 8000 6160 5000 61 160 Overheads are split between the two products on the basis of total sales revenue. (a) Calculate, to two decimal places, the profit or loss per unit of each product. Additional information The following additional monthly data is available. 1 Approximately 40% of the floor space in the factory is used in the manufacture of product A and 60% in the manufacture of product B. 2 The machinery used to manufacture product A is set up 300 times a month and the machinery for product B 500 times a month. 3 The number of orders packed for despatch are 700 a month for product A and 420 a month for product B. 4 300 quality inspections take place each month for product A and 700 for product B. (b) Calculate the amount of overhead allocated or apportioned to each product using the additional monthly data. (c) Name and explain why one of Bob's overhead costs cannot be allocated using activity based costing. (d) Calculate, to two decimal places, the profit or loss per unit of each product which would be earned if overheads were calculated using the additional monthly data. (e) Advise Bob whether or not he should make any changes to the selling prices. Justify your answer. Bob manufactures and sells two products. He provides the following information. Product A Product B 2000 units 3000 units Monthly sales $8 Direct material cost per unit Direct labour cost per unit $10 Selling price per unit $29 The total overheads for the month are as follows. Rent Machine set-up costs Packaging Quality inspections $ 42000 $12 $11 $46 8000 6160 5000 61 160 Overheads are split between the two products on the basis of total sales revenue. (a) Calculate, to two decimal places, the profit or loss per unit of each product. Additional information The following additional monthly data is available. 1 Approximately 40% of the floor space in the factory is used in the manufacture of product A and 60% in the manufacture of product B. 2 The machinery used to manufacture product A is set up 300 times a month and the machinery for product B 500 times a month. 3 The number of orders packed for despatch are 700 a month for product A and 420 a month for product B. 4 300 quality inspections take place each month for product A and 700 for product B. (b) Calculate the amount of overhead allocated or apportioned to each product using the additional monthly data. (c) Name and explain why one of Bob's overhead costs cannot be allocated using activity based costing. (d) Calculate, to two decimal places, the profit or loss per unit of each product which would be earned if overheads were calculated using the additional monthly data. (e) Advise Bob whether or not he should make any changes to the selling prices. Justify your answer.

Answer rating: 100% (QA)

To calculate the profit or loss per unit of each product well need to allocate the total overheads to each product based on the total sales revenue and then compute the profit or loss considering the ... View the full answer