Question

XYZ Company allocates fixed overhead costs based on direct labor dollars, with an allocation rate of $5 per DL$. XYZ sells 1,000 units of product X per month at a price of $20 per unit. The variable costs are: direct materials $5/unit, direct labor $2/unit, and variable overhead $1/unit. Compute the profit margin per unit of product X Group of answer choices $10 per unit $10.75 per unit $12 per unit $13 per unit $2 per unit

Answer 1

Answer:

See below

Explanation:

Given that;

Price per unit = $20

Direct labor cost = $2

Direct material cost = $5

Overhead cost = $1

Fixed overhead allocation= $5 per direct labor cost = $5 × $2 = $10

Total expenses = $2 + $5 + $1 + $10 = $18

Therefore , profit margin

= Price per unit - Total expenses

= $20 - $18

= $2