PRODUCTION COST ANALYSIS PROBLEM PROBLEM 1 (5 PTS) ABC corporation found that it
ID: 402687 • Letter: P
Question
PRODUCTION COST ANALYSIS PROBLEM
PROBLEM 1 (5 PTS)
ABC corporation found that its total indirect costs is $10 million per year.ABC employs 100 direct labor who work 40 hours per week over a 50 working weeks per year. What is the overhead burden for this company ? If it takes $10. Of materials and 2 direct labor hour @$20./ lab-hr to make a product, then what is the total cost of making this product?
Overhead burden = (total indirect cost for one year)/ ( total labor hours in one year)=
Cost of a product = material cost /unit + direct labor cost/unit + Overhead cost/unit=
PROBLEM 2 (5PTS)
During the product development stage, a market survey indicated that the expected sales volume of product A will be 100,000 units per year at a price of $10. Per unit. The variable cost per unit will be $2. But the cost of product development will be $100,000. and the cost of sales advertisement (promotion) is expected to be $100,000. Then,
What is the break-even sales volume of the product A for the company?
BEP= (total fixed cost)/(price/unit)-(variable cost/unit) =
Will the company make any profit from selling 100,000 units of product A? If so , how much?
Profit = Revenue – total cost =
Explanation / Answer
problem 1
Overhead burden = (total indirect cost for one year)/ ( total labor hours in one year)
= $ 10 million / (100*40*50) = $ 50
Cost of a product = material cost /unit + direct labor cost/unit + Overhead cost/unit
= $ 10 + 4 2*20 = $ 50
Problem 2
BEP= (total fixed cost)/(price/unit)-(variable cost/unit) = 400000/8 = 50,000
break even sales volume = 50,000 units
Will the company make any profit from selling 100,000 units of product A? If so , how much?
Profit = Revenue – total cost = 10*100,000 - 400,000 - 2*100,000= 400,000
the profit wil be $400,000
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