question: 1. If allocating fixed manufacturing overhead based on direct labor hour basis, calculate (i) the sale price of products A and B (ii) budgeted profit of products A and B. 2. If allocating fixed manufacturing overhead based on machine hour basis, calculate (i) the sale price of products A and B (ii) budgeted profit of products A and B.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Mike. Inc has two products A and B. The budgeted fixed manufacturing overhead is $10,000. The department
is expected to work in full capacity. It plans to use cost-based pricing by using the absorption method. Assume
the firm can produce and sell 1,000 units Product A and 1,000 units Product B.


                                                                        Product A   Product B
Direct Materials                                                           $3           $2
Direct Labor                                                                 $1           $3
Variable Manufacturing Overhead                              $2            $1
Budgeted labor hours used for each unit product       1              4
Budgeted machine hours used for each unit product   3              1
Sale Demand                                                           1,000      1,000


                                                                     Product A      Product B
Required Investment                                         $5,000         $30,000
Required ROI Rate                                            10.00%            5.00%
Unit Variable Selling Expenses                                $1                  $2
Fixed Selling Expenses                                    $2,000             $4,000

 

question:

1. If allocating fixed manufacturing overhead based on direct labor hour basis, calculate

(i) the sale price of products A and B

(ii) budgeted profit of products A and B.

2. If allocating fixed manufacturing overhead based on machine hour basis, calculate

(i) the sale price of products A and B

(ii) budgeted profit of products A and B.

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