Using ABC to Compute Product Cost and Make Decisions Yosef Company makes two products—guns and butter. Production cost data are as follows:

Both the guns and the butter are manufactured in the same facility and, surprisingly, using the same equipment. The company manufactures seven different gun models and three different types of butter. Total overhead cost for the production facility was $600,000 for the most recent year. An ABC analysis of these overhead costs revealed the following:

The hours referred to with respect to the unit-level overhead are direct labor hours. TheABC analysis indicates that direct labors hours is the best basis on which to assign this unitlevel overhead. The remaining $100,000 in overhead ($600,000 total $500,000 assigned to the overhead cost pools) was determined to be related to facility support and therefore cannot be meaningfully assigned to either product.
Total revenue from the sale of guns was $450,000. Total revenue from the sale of butter was $500,000.
Required:
Using the ABC overhead analysis, compute the following three quantities: (1) the gross profit from the sale of guns, (2) the gross profit from the sale of butter, and (3) overall company gross profit. Also, (4) estimate what gun gross profit would be if only two gun models were produced.

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Production volume Direct materials Direct labor 1,000 guns $50,000 500,000 pounds $100,000 $120,000 $30,000