Question
Use the following contribution margin statement: Product A Product B Total sales volume (units) 100 180 280 Revenue $18,000 $108,000 $126,000 Variable costs: direct materials
Use the following contribution margin statement:
Product A | Product B | Total | |
sales volume (units) | 100 | 180 | 280 |
Revenue | $18,000 | $108,000 | $126,000 |
Variable costs: | |||
direct materials | $3,600 | $7,200 | $10,800 |
direct labor | $7,200 | $18,000 | $25,200 |
Contribution margin | $7,200 | $82,800 | $90,000 |
Fixed costs | $75,600 | ||
Profit | $14,400 |
Required: (a) allocate the shared fixed costs ($75,600) among product A and product B, using direct labor dollars as the allocation basis. allocation rate= per DL$ FC allocated to A= FC allocated to B= (b) using the allocated costs from (a), compute the profit margin for product A and product B. If you get a negative number, enter it with a minus sign, i.e., enter negative $1000 as -1000, not as ($1000) profit margin for A= profit margin for B=
c) based on the profit margins from (b), should you kill product A or product B in the long term? Explain your decision.
d) allocate the shared fixed costs ($75,600) among product A and product B, using the number of units as the allocation basis. allocation rate= per unit FC allocated to A= FC allocated to B=
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