Required information [The following information applies to the questions displayed below.] Abel Company manufactures two products called Deluxe and Regular that sell for $68 and $39, respectively. Each product uses only one type of raw material that costs $3 per kilogram. The company has the capacity to annually produce 54,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Deluxe $ 14 Regular $ 6 9 5.00 4.00 3.00 9 10 5 4 7.00 7 $ 48 $ 35 Cost per unit The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 8. Assume that Abel normally produces and sells 40,200 Regular units and 30,200 Deluxe units per year. If Abel discontinues the Regular product line, its sales representatives could increase sales of Deluxe by 7,300 units. If Abel discontinues the Regular product line, how much would profits increase or decrease? Profit increases by
Required information [The following information applies to the questions displayed below.] Abel Company manufactures two products called Deluxe and Regular that sell for $68 and $39, respectively. Each product uses only one type of raw material that costs $3 per kilogram. The company has the capacity to annually produce 54,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Deluxe $ 14 Regular $ 6 9 5.00 4.00 3.00 9 10 5 4 7.00 7 $ 48 $ 35 Cost per unit The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 8. Assume that Abel normally produces and sells 40,200 Regular units and 30,200 Deluxe units per year. If Abel discontinues the Regular product line, its sales representatives could increase sales of Deluxe by 7,300 units. If Abel discontinues the Regular product line, how much would profits increase or decrease? Profit increases by
Chapter5: Process Costing
Section: Chapter Questions
Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...
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