Alpha company manufactures and sells two products: Product A and Product B . The
ID: 2541636 • Letter: A
Question
Alpha company manufactures and sells two products: Product A and Product B. The following costs were incurred during the company’s first year of operations:
Direct materials
product
A
$7
product
B
$6
Direct labor
$9
$7
Variable manufacturing overhead
$4
$7
Variable selling and administrative cost
$5
$3
Fixed manufacturing overhead
$320,000
$270,000
Fixed selling and administrative cost
$210,000
$150,000
During the year, the company produced 27,000 units of product A and sold 23,000 units and produced 18,000 units of product B and sold 17,000 units.
The selling price of product A and B is respectively: $72 and 67 per unit.
Required:
1.Compute the unit product cost of Product A and Product B.
2.Compute the profit per product (Product A and Product B).
Direct materials
product
A
$7
product
B
$6
Direct labor
$9
$7
Variable manufacturing overhead
$4
$7
Variable selling and administrative cost
$5
$3
Explanation / Answer
Calculation of unit product cost
1.Product A
Product cost=$7+$9+$4+($320000/27000)
= 31.85
(Fixed & Variable selling expenses will not consider here)
2 Product B
Cost =$6+$7+$7+($270000/18000)=$35
Calculation of Profit.
1.Product A
Profit =$72-($7+$9+$4+$5+(320000+210000/23000))
=$72-$44.04=$27.95
2.Product B
Profit=$67-($6+$7+$7+$3+($270000+150000/17000))
=$67-$47.70
=$19.29
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