Saturn, a chocolate manufacturer, produces three products: ? The Sky Bar, a bar of solid milk chocolate. ? The Moon Egg, a fondant filled milk chocolate egg. ? The Sun Bar, a biscuit and nougat based chocolate bar.
Information relating to each of the products is as follows: Sky Bar Moon Egg Sun Bar Direct labour cost per unit ($) 0.07 0.14 0.12
Direct material cost per unit ($) 0.17 0.19 0.16
Actual production/ sales (units) 500,000 150,000 250,000
Direct labour hours per unit 0.001 0.01 0.005
Direct machine hours per unit 0.01 0.04 0.02
Selling price per unit ($) 0.50 0.45 0.43
Annual production overhead = $80,000
Required:
Using traditional absorption costing, calculate the full production cost per unit and the profit per unit for each product. Explain the implications of the figures calculated.