Variable Costing and Two Product Lines. Presupuesto Co. manufactures lawn rakes and shovels at its San Juan, Puerto Rico, plant. Data with respect to sales and production have been estimated by Javier Clemente, the controller, for next year as follows:

The fixed factory overhead of the San Juan plant is apportioned to the products at the rate of \(\$ 3.00\) per production hour. Total corporate fixed overhead of \(\$ 300,000\) has been apportioned to the San Juan plant, but this is not apportioned to the products.
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1. Assuming a variable costing approach, prepare an income statement that will show for each product line and in total:

(a) The contribution margin.

(b) The apportioned fixed factory overhead.

(c) The profit for each product.

(d) The final profit after recognizing apportionment of the corporate fixed overhead.
2. What is the expected total unit cost of each product line without apportioning the corporate fixed overhead?
3. Apportion corporate fixed overhead to each product on the basis of production time. Now, what is the expected total unit cost of each product line?
4. Which unit cost number would be best to use in establishing a cost-based selling price? Why?

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Estimated units to be sold. Unit selling price.... Unit variable cost of manufacturing Production time per unit of product Rakes Shovels 240,000 160,000 $3.50 $6.00 $1.75 $2.75 10 min. 30 min.