Fratelli Ltd manufactures two products: hexo and zaco. 

The following information is available about production costs. 

• The direct costs of product are as follows.

• The company total factory overheads are $50 000. (Other overhead costs can be ignored.) Po. 

• Annual production is: 

• It has been established that the company has the following cost pools and cost drivers. 

Currently both products sell at $53 per unit. The company operates in a very competitive market and pricing was based on a survey of the prices charged by rival companies. However, the directors are not convinced that the company should continue to produce both products, although all production is currently being sold. 

a. Prepare a calculation of the cost of making a hexo unit and a zaco unit. 

b. What advice would you give the directors regarding the production and pricing of both products?

Transcribed Image Text:

Нехо Zaco Direct materials per unit 14.00 19.00 Direct labour per unit 11.00 12.00