Total production overhead $5,017,500 Envelopes Cups Direct costs $8,250,000 $8,7

Question

Total production overhead $5,017,500
                                                          Envelopes                                             Cups
Direct costs                                       $8,250,000                                         $8,750,000
Units produced                                  1,500,000                                                350,000
Machine hours                                      200,000                                                  50,000
Direct labor hours                                  34,500                                                 153,625
Number of quality inspections                    1,000                                                  6,500
Revenue generated by the two products $15,000,000                                     $16,800,000.

Using the old plant-wide rate calculate gross profit and the rate of return on the two products.

Explanation / Answer

gross profit = -($15,000,000 - $16,800,000 ) = 1,800,000 dollars

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