Question

Alpha Company makes products A and B. Its contribution margin statement is as follows: A B Total Sales volume (units) 400 600 1,000 Revenue $60,000 $60,000 $120,000 Variable Costs Direct materials $25,000 $15,000 $40,000 Direct labor $15,000 $10,000 $25,000 Contribution Margin $20,000 $35,000 $55,000 Fixed Costs $50,000 Profit $5,000 Alpha allocates its fixed costs (capacity costs) based on direct labor dollars. Compute the allocated fixed costs for product A. Group of answer choices $2.00 $30,000 $50,000 $60,000 $110,000

Answer 1

Answer:

Product A= $30,000

Explanation:

Giving the following information:

A B Total

Direct labor $15,000 $10,000 $25,000

Fixed Costs $50,000

First, we need to calculate the allocation rate:

Allocation rate= total estimated costs for the period/ total amount of allocation base

Allocation rate= 50,000 / 25,000

Allocation rate= $2 per direct labor dollar

Now, for product A:

Product A= 2*15,000= $30,000