- A business sells two products and provided the following budget information for your analysis and comments:
|Sales (units)||4 800||3 200|
|Selling price per unit||$20||$30|
|Variable cost per unit||$12||$15|
|Total fixed costs (for both) $ 62,100|
The manager of the business has noticed that Delta has a higher contribution margin per unit than Gamma and wants to investigate the impact on profits if the two items were sold in a ratio of 50:50.
- What profit is expected based on the current sales mix?
- What is the break-even point on the current sales mix?
- What would be the expected profit in the two items were sold in the proportion 50:50?
- What would be the new break-even point at a 50:50 sales mix?
- Actdot Inc has an overhead budget of $ 1200, 000 that was based on 24,000 direct labour hours. The firm is investigating the possible introduction of activity-based costing and has prepared the following information.
Activity Costs Cost driver
Design 250 000 1000 design changes
Assembly 800 000 20 000 machine hours
Testing 150 000 1000 tests
Actual results recorded for Job No. 94 were:
Direct labour hours 80
Design changes 4
Machine hours 60
- Calculate the single overhead application rate using direct labour hours.
- Calculate the application rate for each activity based on the particular cost driver.
- Determine the overhead applied to Job No. 94 using the traditional and activity-based costing methods.
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