Answer:
Profit margin= $58,581.5
Explanation:
Giving the following information:
Activity cost pool Total cost Total activity
Assembly $583,700 24,000 machine-hours
Inspection $342,000 7,500 inspection-hours
Packaging $24,500 1,200 order
B63:
n= 440
33 machine-hours
13 inspection hours
17 orders.
Product B63 requires $52.70 in direct materials per unit and $62.20 in direct labor per unit. Product B63 sells for $255 per unit.
First, we need to calculate the estimated overhead rate for each activity pool:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
<u>Assembly:</u>
Estimated manufacturing overhead rate= 583,700/24,000= 24.32 per machine-hour
<u>Inspection:</u>
Estimated manufacturing overhead rate= 342,000/7,500= $45.6 per inspection
<u>Packaging:</u>
Estimated manufacturing overhead rate= 24,500/1,200= $20.42 per order
Now, we need to allocate the overhead to product B63:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Allocated MOH= (24.32*33) + (45.6*13) + (20.42*17)= $1,742.5
Total cost= direct material + direct labor + allocated overhead
Total cost= (52.7*440) + (62.20*440) + 1,742.5= $52,298.5
Profit margin= 440*252 - 52,298.5= $58,581.5
