Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q1 A company is making a study of the relative profitability of the two products-A and B. In addition to direct costs, indirect selling and

image text in transcribed

Q1 A company is making a study of the relative profitability of the two products-A and B. In addition to direct costs, indirect selling and distribution costs to be allocated between the two products are as under: Insurance charges for inventory (finished) $78,000; Storage costs $1,40,000; Packing and forwarding charges $ 7,20,000 ; Salesmen salaries $ 8,50,000; Invoicing costs $ 4,50,000. Other details are : Product A Product B Selling price per unit ($) 500 1,000 Cost per unit (exclusive of indirect selling and distribution cost) ($) 300 600 Annual sales in units 10,000 8,000 Average inventory (units) 1,000 800 Number of invoices 2,500 2,000 One unit of product A requires a storage space twice as much as product B. The cost to pack and forward one unit is the same for both the products. Salesmen are paid salary plus commission @ 5% on sales and equal amount of efforts are put forth on the sales of each of the products. Required: (i) Set up a schedule showing the apportionment of the indirect selling and distribution costs between the two products, (ii) Prepare a statement showing the relative profitability of the two products

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting An International Introduction

Authors: David Alexander

7th Edition

129229583X, 978-1292295831

More Books

Students also viewed these Accounting questions

Question

Does your message reiterate its main idea?

Answered: 1 week ago