Hydraulic Hoses, Inc. produces specialized industrial hoses for applications suc

Question

Hydraulic Hoses, Inc. produces specialized industrial hoses for applications such as high-pressure hydraulics and the transference of highly corrosive materials. The company recently implemented an ABC system for three of its products and is interested in evaluating its effectiveness before converting to an ABC system for all of its products. To perform this evaluation the company has compiled data for the three products using both the traditional system and the new ABC system. The traditional system uses a single driver (direct materials costs). The ABC system uses a variety of cost drivers related to the activities used to produce the metal products. The three products involved in the trial run of the ABC system were D-13, K-17, and R-23. The following data relate to these products.

Cost per Unit: Selling Price per Unit $15.50 18.40 19.60 Units Total Costs Allocated: Traditional Produced Traditional Costing 360,000 225,000 Total Cost Cost per Unit Allocated:ABC Product D-13 K-17 R-23 Totals Costing ABC $ 9.60 $3,312,000 2,340,000 481,500 $6,133,500 $ 9.20 $3,456,000 2,407,500 270,000 $6,133,500 10.70 10.80 10.40 19.26 25,000 Required A. Determine the gross profit margin for each product produced based on the ABC data B. Determine the gross profit margin for each product produced based on the traditional costing data

Explanation / Answer

ANSWER ;

  

  ABC costing

Taditional costing ;

NOTE ;

Gross profit margin = sales price per unit - cost /( sales price per unit ) * 100

Products ABC margin D 13 40.60% [15.5 - 9.2 / (15.5)] *100 K-17 43.40% [18.4 - 10.4 /(18.4)] *100 R-23 1.73% [19.6 -19.26 /(19.6)] *100

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