Cost allocation

	Product A	Product B	Total
sales volume (units)	360	200	560
Revenue	$4,000	$24,000	$28,000
Variable costs:
direct materials	$800	$1,600	$2,400
direct labor	$1,600	$4,000	$5,600
Contribution margin	$1,600	$18,400	$20,000
Fixed costs			$16,800
Profit			$3,200

a) Allocate the fixed costs between products A and B. Use direct labor dollars as the cost driver. allocation rate=$ per ___________ DL$ allocated costs for A=$ __________ allocated costs for B=$ ___________ b) Compute the profit margins for products A and B: profit margin for A=$ ____________ profit margin for B=$ ____________ Enter negative numbers with a minus sign, i.e., a loss of $1,000 should be entered as -1000, not as (1000) or ($1000).

* Knowing That If you drop product A in the short term, fixed costs will remain the same , profit will: decrease by $1,600

* If you drop product A in the long term, fixed costs will decrease by $4,800 , profit will increase by $3,200

c) Allocate the fixed costs between products A and B, using the number of units as the cost driver. allocation rate=$ ___________ per unit allocated costs for A=$ ___________ allocated costs for B=$ ____________