A company is making a study of the relative profi tability of the two products A and B in addition to direct costs, indirect selling and distribution costs to be allocated between the two products, which are provided as follows:

One of the product A requires a storage space twice as much as product B. The cost of packing and forward one unit is the same for both the products. Salesmen are paid salary plus commission @ 5 per cent on sales and equal ammount of efforts are put forth on the sales of each of the products Required: (1) Set up a schedule showing the apportionment of indirect selling and distribution costs between the two products. (2) Prepare a statement showing the relative profi tability of the two products

Transcribed Image Text:

Rs. Insurance coverage for inventory (finished) 78,000 Storage costs 1,40,000 Packing and forwarding charges 7,20,000 Salesman salaries 8,50,000 Invoicing costs 4,50,000 Other details are given here: Product A Product B Selling price per unit (Rs.) 500 1,000 Cost per unit (inclusive of indirect selling & distribution costs) 300 600 Annual sales (in units) 10,000 8,000 Average inventory (units) 1,000 800 Number of Invoices 2,500 2,000