Answer:
Tadros Company
The gross profit per unit:
Product A Product B
Gross profit per unit $18.74 $118.39
Explanation:
a) Data and Calculations:
Product A Product B
Direct materials per unit $ 20 $ 25
Direct labor hours per unit DLH 0.5 1.5
Machine hours per unit 0.4 1.2
Batches 200 360
Volume (units) 16,000 3,600
Engineering modifications 20 80
Number of customers 800 720
Market price per unit $ 55 $ 220
Direct labor rate = $20 per DLH
Cost Pools Overhead Costs Driver
Indirect manufacturing
Engineering support $ 53,600 Engineering modifications
Electricity 53,600 Machine hours
Setup costs 160,800 Batches
Nonmanufacturing
Customer service 136,800 Number of customers
Overhead rate using ABC:
Cost Pools Overhead Costs Driver Rates
Indirect manufacturing
Engineering support $ 53,600 100 modifications = $536
Electricity 53,600 10,720 Machine hours $5
Setup costs 160,800 560 Batches $287
Customer service 136,800 1,520 customers $90
Cost of production:
Product A Product B
Direct materials per unit $320,000 $90,000
Direct labor hours per unit DLH 160,000 108,000
Overhead costs:
Engineering support 10,720 42,880
Electricity 32,000 21,600
Setup costs 57,400 103,320
Total production costs $580,120 $365,800
Manufacturing cost per unit $36.26 $101.61
Sales Revenue ($55 and $220) 880,000 792,000
Gross profit $299,880 $426,200
Gross profit per unit $18.74 $118.39
