A manufacturing company makes three products, A, B, and C. Thefixed FO is $60,000, consisting of $10,000 for material handling,material waste, and procurement; $30,000 for rent and utilities;and $20,000 for safety and canteen costs. Other costs are shownin
table 6.16.
Product A Product B Product CNumber of Units Produced Per Month(-) 250 400 900Total Material Costs Per Month ($) 5000 8000 4000Labor Hours Per Unit (hr) 4 3.5 1.5Labor Rate Per Unit ($/hr) 25 20 30Machine Hour Per Unit (hr) 1 1 3
a. Determine the product cost for products A, B, and C, usingthe ABC method.
b. If products A, B, and C are sold at $400, $350, and $150 perunit, respectively, what is the gross profit for each product?
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