Question

The following data are for the two products produced by Tadros Company. Direct materials Direct labor hours Machine hours Batches Volume Engineering modifications Number of customers Market price Product A $14 per unit 0.5 DLH per unit 0.4 MH per unit 125 batches 10,000 units 10 modifications 500 customers $35 per unit Product B $25 per unit 1.5 DLH per unit 1.1 MH per unit 250 batches 2,000 units 50 modifications 400 customers 95 per unit per Sunit The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows. Costs Driver Indirect manufacturing Engineering support Electricity Setup costs Nonmanufacturing Customer service $24,500 Engineering modifications 24,800 Machine hours 41,000 Batches 73,000 Number of customers Required:

Answer 1

Answer-1:

Total Computation of overhead rate and Overhead assignment to product- (Plantwide overhead rate) Product Product B Direct labor hours per unit 0.50 1.50 Volume (In Units) 10,000 2,000 Direct Labor hours 5,000 3,000 Manufacturing overhead Overehead rate - Per direct labor dollar (Manufacturing overhead/Direct labor) Overhead allocation 56438 33863 Overhead cost per unit 5.64 16.93 8,000 90,300 $ $ 11.29 90300 Computation of per unit cost (Plantwide overhead rate) Product Direct material 14 Direct Labor Manufacturing overhead 5.64 Unit product cost 29.64 10 Product B 25 30 16.93 71.93

Answer-1.2:

Computation of Gross Profit Per unit Selling Price Product cost Gross Profit Per unit Product 35.00 29.64 5.36 Product B 95.00 71.93 23.07

Answer-2.1:

Computation of Gross Profit Per customer Product 10000 500 20 107.20 Product B 2000 400 Volume Number of customer Units purchased per customer Gross Profit per customer 115.35

Answer-2.2:

Computation of cost of providing customer service to each customer Product A Product B Customer service cost Number of customer 400 Cost of customer service to each customer Total 73000 900 81.11 500 Checking Adequacy of Gross Profit Gross Profit per customer Cost of customer service to each customer Profit (Loss) per customer Is the profit adequate Product A 107.20 81.11 26 Yes Product B 115.35 81.11 34 Yes

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