Can you help me with question#6? Please see attachment.

TenAlpina Tools: Product Line Profitability Giulia mentioned that if competitors have excess capacity they might be pricing to cover variable costs. Compute the contribution margin per unit of each product line in terms of bothdollars and percentage. First, we need to find how the Direct Labor per unit: Product Line Piton Hammer Rock nut sets Product Line Piton Hammer Rock nut sets DL per TDL per Product Product Product DL per Volume (mins) (hours) DL Ratio Unit 4200 2 140.00 17653.51 $4.20 400 13 86.67 10928.36 $27.32 2300 4 153.33 19334.80 $8.41 380.00 47916.67 Variable Cost Selling Deliver V DL per Price DM y Power Supplies Unit TVC CMU CMR 10.50 1.45 0.00 0.18 0.11 4.20 5.94 $4.56 43.40% 61.00 10.44 1.00 0.46 0.14 27.32 39.36 $21.64 35.47% 24.50 6.01 0.15 0.05 0.09 8.41 14.71 $9.79 39.97% 2. Assume the product mix doesn't change, a. Compute the breakeven point for TenAlpina as a whole. Product Line Piton Hammer Rock nut sets Product Volume Ratio CMU 4200 10.5 8.76 400 1 48.96 2300 5.75 18.20 Sales of Hammers, Rock nut sets, and Pitons are in the ratio of 400:2300:4200, so for every 1 unit of Hammer, 5.75 units of Rock nut sets are sold and 10.5 units of Pitons are sold. Let Q be the breakeven unit for Hammers, 5.75Q be thebreakeven unit for Rock nut sets, and 10.5Q be the breakeven unit for Pitons. Items Depreciation Fixed Cost $1,612.92 Manufacturing Occupancy Supervision Office Salaries General Administration Administration Occupancy Total Fixed Cost $2,200.00 $5,270.83 $10,541.67 $600.00 $550.00 $20,775.42 At breakeven point, the operating income is zero; therefore,we will use the following formula: Total Contribution Margin - Fixed Cost = Operating Income $4.56*(10.5)Q + $21.64*(1)Q + $9.79*(5.75)Q - $20,775.42 = 0 (47.88 + 21.64 + 56.29)Q = $20,775.42 Q = $20,775.42 / 125.81 Q = 165 Units Breakeven points for the different units will be as follow: Piton = 10.5 * 165 = 1,733 Units Hammer = 1 * Q = 165 Units Rock nut sets = 5.75 * 165 = 945 Units The Breakeven Point for TenAlpina as a whole is: $51,414 of Sales. (1,733 * $10.50) + (165 * $61.00) + (945 * $24.50) = $18,196.50 + $10,065 + $23,152.50 = $51,414 b. Compute the current margin of safety for TenAlpina as a whole. The current Margin of Safety is the Budgeted Sales - Breakeven Sales. MOS = $124,850.00 - $51,414.00 = $73,436.00 3. What is the value of information to management? Does it make sense to compute a breakeven point for each product separately? This information provides value to Giulia and her team by informing them what the fixed and variable costs are for each product. Computing the breakeven point for each product specifically allows Giulia to recognize which productsuse more of which resources.These figures can be applied to allocate better costing systems in order to retain higher sales revenue. For example, Hammers provide the least sales volume and revenue earned yet require the most direct labor to be produced, meaning the team at TenAlpina need to be sure hit the breakeven point in sales or cease production. 4. Using standard direct labor time as the overhead allocation base, compute the gross margin for each product in order to verify Giulia's belief about current gross margins. The equation for gross margins is listed below: First we must find the cost of goods sold Product TVC/unit Fixed Cost/unit Total Cost/unit Units Sold Piton Hammer Rock Nut Set 4,200 400 2,300 5.94 21.64 9.79 3.01 3.01 3.01 8.95 24.65 12.80 Cost of Goo Sold 37,590 9,860 29,440 Next we take the revenue from each product listed on the income state and subtract the cost of goods sold just as instructed from the equation above and determine the percentages. Product Piton Hammer Rock Nut Set Revenue from Sales 44,100 24,400 56,350 Cost of Goods Sold 37,590 9,860 29,440 Gross Profit Margin 6,510 14,540 26,910 Gross Profit Margin Percentages: Piton - 6.51% Hammer - 14.51% Rock Nut Set - 26.91% 5.Compute the gross margin for each product line using the combination of direct labor hours and machine hours to allocate overhead. Do the results make sense a. with respect to Giulia's belief about margins? b. with respect to current market conditions? Over Head Rates For Direct Labor and Machine time ( We keep both direct labor and machine time as the main factors) Monthly Manufacturing overhead Monthly Direct Labor Total Total $12,663.75 Machine Related 3,392.92 Labor Related 57,187.50 47,916.67 60,580.42 0 3,392.92 47,916.67 105,104.16 This data is from the given exhibits in the case: Data Standard Machine Monthly Volume Min Pittons 1.5 4200 Hammers 11 400 Rock Nuts Sets 2 2300 The MH -Driven cost will be as followed: Aggregate SMM % Total 6,300 4,400 4,600 41% 29% 30% 3,392.92 and so the rate per SMM(standard machine min) will be $ 0.22 per SMM. Data: Pittons Hammers Rock Nuts Sets Standard Direct Labor Min ( SDLM) 2 13 14 Monthly Volume 4200 400 2300 Aggregate SDLM 8400 5200 9200 22,800 %Total SDL 37% 23% 40% The DL-driven cost here will be : 57,187.50 Rate: $2.51 per SDLM Lastly, Pittons Hammers Rock Nuts Sets Price Direct Materials Conversion 10.50 61 24.50 $1.45 $10.44 $6.01 $5.35 $34.05 $10.48 Gross Margin $3.70 $15.51 $8.01 A and B) I think that the results related to margin -the gross margin vary for Pittons, Hammers and Rock Nuts Sets. They fluctuate quite a bit and don't carry a standardized pattern. As Far as the current market conditions are concerned, if we look at direct materials, conversion and the gross margin percentage, we get a better understanding about how it works. For Pittions and Rock Nuts the gross margin percentage looks the same almost however for Hammers it's a bit lowered down. 6. Compute the gross margin using the more detailed ABC approach. Do the results make sense a. with respect to Giulia's belief about margin? b. with respect to current market conditions? 7. Which of the three cost-allocation methods seems to fit the situation best? Why? Are there conditions under which your answer would be different? GM% 35.2% 25.4% 32.7%