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You are the manager of a company manufacturing different kinds of showers in three broad product lines. Please find below relevant information about the
You are the manager of a company manufacturing different kinds of showers in three broad product lines. Please find below relevant information about the 3 Product Lines (PL). Shower PL1: 1,000,000 units produced, selling price/unit: 9; Direct materials & direct labor costs/unit: 2; labor hours/unit: 2.2 Shower PL 2: 2,000,000 units produced, selling price/unit: 8.5, Direct materials & direct labor costs/unit: 4; labor hours/unit: 1.9 Shower PL 3:40,000 units produced, selling price/unit: 15, Direct materials & direct labor costs/unit: 4.5, labor hours/unit: 2.1 Currently, this company incurs in total overhead costs of 12,776,400 per year and allocates it to individual products using labor hours as cost driver. Determine product profitability for each product line (1,2 and 3), under the cost-driver method for allocating overhead costs.
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