Question Four

Home Hygiene Limited manufactures two types of protective gloves, The Latex Disposable and The Heavy Duty Nitrile. The gloves are produced on the same assembly lines and are sold in packs of 100. The sales of both gloves for 2022 are predicted to be 810,000 packs of Latex Disposable and 1,030,000 packs of Heavy Duty Nitrile. The budgeted costs for the coming year are as follows.

Variable Cost Fixed Cost

Material $ 1,534,987 $ 6,480,354

Other $ 1, 912, 580 $11, 093,079

Both gloves incur similar variable material costs on a per pack production basis. The fixed costs are apportioned Latex Disposable $5,562,240 and the Heavy-Duty Nitrile $ 12,011,193. The other variable costs are allocated on a machine time basis with Latex Disposable requiring 366,000 machine hours and Heavy-Duty Nitrile 549,000 machine hours. Home Hygiene directors have indicated that they require a profit of $1,502,000 from the Latex Disposable gloves and $1,947,000 from the Heavy-Duty Nitrile gloves for 2022.

a. Calculate the total cost for each type of glove.

b. What price should be charged for each pack and glove?