Alpha company manufactures and sells two products: Product A and Product B . The
ID: 2557720 • 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:
Variable cost per unit:
Product A
Product B
Direct materials
$7
$6
Direct labor
$9
$7
Variable manufacturing overhead
$4
$7
Variable selling and administrative cost
$5
$3
Fixed cost per year:
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:
Compute the unit product cost of Product A and Product B.
Compute the profit per product (Product A and Product B).
Variable cost per unit:
Product A
Product B
Direct materials
$7
$6
Direct labor
$9
$7
Variable manufacturing overhead
$4
$7
Variable selling and administrative cost
$5
$3
Fixed cost per year:
Fixed manufacturing overhead
$320,000
$270,000
Fixed selling and administrative cost
$210,000
$150,000
Explanation / Answer
1 Product A Product B Direct materials 7 6 Direct labor 9 7 Variable manufacturing overhead 4 7 Fixed manufacturing overhead 11.85 15 Unit product cost 31.85 35 2 Product A Product B Total sales 1656000 1139000 Cost of goods sold 732550 805000 Gross profit 923450 334000 Variable selling and administrative cost 115000 51000 Fixed selling and administrative cost 210000 150000 Profit 598450 133000 Profit per unit 26.02 7.82
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