Use the following contribution margin statement:
|
Product A |
Product B |
Total |
| sales volume (units) |
100 |
180 |
280 |
| Revenue |
$18,000 |
$108,000 |
$126,000 |
| Variable costs: |
|
|
|
| direct materials |
$3,600 |
$7,200 |
$10,800 |
| direct labor |
$7,200 |
$18,000 |
$25,200 |
| Contribution margin |
$7,200 |
$82,800 |
$90,000 |
| Fixed costs |
|
|
$75,600 |
| Profit |
|
|
$14,400 |
Required:
(a) allocate the shared fixed costs ($75,600) among product A and product B, using direct labor dollars as the allocation basis.
allocation rate= per DL$
FC allocated to A=
FC allocated to B=
(b) using the allocated costs from (a), compute the profit margin for product A and product B.
If you get a negative number, enter it with a minus sign, i.e., enter negative $1000 as -1000, not as ($1000)
profit margin for A=
profit margin for B=
c) based on the profit margins from (b), should you kill product A or product B in the long term? Explain your decision.
d) allocate the shared fixed costs ($75,600) among product A and product B, using the number of units as the allocation basis.
allocation rate= per unit
FC allocated to A=
FC allocated to B=