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Requirement 1:
Compute the
Requirement 1:
Answer to Problem 4APSA
| Gross Profit per Unit | ||
| Product A | Product B | |
| Manufacturing Cost per unit | $26.37 | $84.64 |
| Gross Profit per unit | $3.63 | $35.36 |
Explanation of Solution
| Computation of Manufacturing Cost per Unit | ||
| Product A | Product B | |
| Direct Materials per Unit | $15 | $24 |
| Direct Labor per Unit | $6
(0.3 DLH per unit × $20 per DLH) | $32
(1.6 DLH per unit × $20 per DLH) |
| Overhead Cost per Unit | $5.37
(0.3 DLH per unit × $17.90 per DLH) | $28.64
(1.6 DLH per unit × $17.90 per DLH) |
| Manufacturing Cost per unit | $26.37 | $84.64 |
| &Total Direct Labor Hours | ||
| Product A (10,000 units × 0.3 DLH per unit) | 3,000 DLH | |
| Product B (2,000 units × 1.6 DLH per unit) | 3,200 DLH | |
| Total Direct Labor Hours | 6,200 DLH | |
| Computation of Gross Profit per unit | ||
| Product A | Product B | |
| Selling Price per unit | $30 | $120 |
| Manufacturing Cost per unit | $26.37 | $84.64 |
| Gross Profit per unit | $3.63 | $35.36 |
Requirement 2:
Determine the gross profit per customer of Product A and Product B using the plantwide overhead rate.
Requirement 2:
Answer to Problem 4APSA
| Gross Profit per Customer | |
| Product A | Product B |
| $72.60 | $176.80 |
Explanation of Solution
Computation of Gross Profit per Customer
Requirement 3:
Compute the cost of providing customer service to each customer.
Requirement 3:
Answer to Problem 4APSA
The cost of providing customer service to each customer is $90.
Explanation of Solution
Requirement 4:
Compute the manufacturing cost per unit and gross profit per unit of each product line using ABC.
Requirement 4:
Answer to Problem 4APSA
| Gross Profit per Unit | ||
| Product A | Product B | |
| Manufacturing Cost per unit | $24.30 | $95.03 |
| Gross Profit per unit | $5.70 | $24.97 |
Explanation of Solution
| Computation of Manufacturing Cost per Unit | ||
| Product A | Product B | |
| Direct Materials per Unit | $15 | $24 |
| Direct Labor per Unit | $6
(0.3 DLH per unit × $20 per DLH) | $32
(1.6 DLH per unit × $20 per DLH) |
| Overhead Cost per Unit
(Total Overhead Cost / Volume) | $3.30
($32,950 / 10,000 units) | $39.03
($78,050 / 2,000 units) |
| Manufacturing Cost per unit | $24.30 | $95.03 |
| Computation of Indirect Manufacturing Cost for each product line | ||
| Product A | Product B | |
| Engineering Support per modification | $4,200
(12 modifications × $350) | $20,300
(58 modifications × $350) |
| Electricity per machine hour | $10,000
(1,000 MH × $10) | $24,000
(2,400 MH × $10) |
| Setup Costs per batch | $18,750
(125 batches × $150) | $33,750
(225 batches × $150) |
| Total Overhead Cost | $32,950 | $78,050 |
| Computation of Gross Profit per unit | ||
| Product A | Product B | |
| Selling Price per unit | $30 | $120 |
| Manufacturing Cost per unit | $24.30 | $95.03 |
| Gross Profit per unit | $5.70 | $24.97 |
Requirement 5
Determine whether the gross profit per customer for each of these products is greater than the cost of providing customer service.
Requirement 5
Answer to Problem 4APSA
The gross profit per customer for each of these products is greater than the cost of providing customer service.
| Product A | Product B | |
| Gross Profit per Customer | $114 | $124.85 |
| Customer Service per Customer | $90 | $90 |
Explanation of Solution
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Chapter C Solutions
FUNDAMENTAL ACCOUNTING PRINCIPLES
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