Faber Industries manufactures two products: Alpha and Beta. Both products are produced on the same assembly lines and packaged with 10 units of product per package. The predicted sales are 400 000packs of Alpha and 500 000 packs of Beta. The budgeted costs for the coming year are as follows.

Each product uses 50 per cent of the variable material costs. The other costs are allocated as follows: variable costs based on machine time (Alpha 200 000 hours and Beta 100 000 hours) and fixed costs allocated evenly to both products. The management of Faber Industries desires an annual profit of$200 000 per product.
Required:
a. Calculate the total cost for each product.
b. What price should be charged for each product?

Transcribed Image Text:

Variable cost Fixed cost Materials $400 000S800 000 Other S600 000 S1 600 000