MENU
A company uses activity based costing. The total production overheads of $16,050 for the next period are for set up costs of $6,450 and quality inspection costs of $9,600. The company produces two products, Product F and Product G. Details relating to the next period are as follows:
A new customer has offered to purchase Product F for $28.00 per unit. The only costs incurred would be those shown above.
What is the profit per unit of Product F that would be gained by accepting the offer? Give your answer to two decimal places.
Suggested Answer: A
Get Premium CIMAPRO19-P02-1 Questions
as Interactive Web-Based Practice Test or PDF
Real Exam Format
Detailed Explanations
Instant Access
Get Your Practice Test
31 comments · newest first
SE
Selma
10 months ago
Totally agree, $3.90 sounds about right!
CL
Clarence
10 months ago
I think the profit per unit is actually $3.90.
JE
Jennifer
11 months ago
$3.90? That seems a bit high for just setup and inspection costs.
MA
Ma
11 months ago
Yep, and Product F's costs need to be calculated!
SK
Skye
11 months ago
The total overheads are $16,050, right?
TO
Tonette
11 months ago
I'm a bit confused about how to handle the fixed versus variable costs in this scenario. Did we cover that in class?
MI
Mickie
12 months ago
I practiced a question where we had to determine the contribution margin, and I feel like that might help here too.
MO
Mozell
12 months ago
I think we need to figure out the total costs for Product F first, including both set up and quality inspection costs.
RE
Reuben
12 months ago
I remember we calculated profit per unit in a similar question, but I'm not sure how to allocate the overheads correctly between the two products.
MI
Ming
1 year ago
Easy peasy. I'll just plug the numbers into the formula and boom, there's my answer. Can't wait to get this one right and boost my grade.
AL
Alva
1 year ago
Okay, I think I've got this. I'll first calculate the overhead rate per machine hour, then use that to determine the overhead cost per unit of Product F. From there, it's just a matter of subtracting that from the selling price.
SA
Salena
1 year ago
Hmm, I'm a bit confused about how to allocate the overhead costs between the two products. Should I use the machine hours or the number of units produced as the allocation base?
HA
Hayley
1 year ago
This looks like a straightforward activity-based costing problem. I'll need to calculate the overhead cost per unit for each product and then subtract that from the selling price of Product F to get the profit per unit.
MI
Minna
1 year ago
Wait, what? We have to calculate the profit per unit of Product F? I thought this was a knitting class. Oh well, let's see what I can do.
CH
Cherrie
1 year ago
Great! Looks like we can make a profit by accepting the offer for Product F.
SH
Shakira
1 year ago
The profit per unit for Product F would be $3.90 if we accept the offer from the new customer.
CH
Cheryl
1 year ago
So, the total cost per unit for Product F is $24.10. Now we just subtract the selling price to find the profit.
SI
Simona
1 year ago
Yes, we need to calculate the profit per unit of Product F based on the costs provided.
WI
Willis
1 year ago
Sure, I calculated the profit per unit by subtracting the total production overheads from the selling price of Product F.
LE
Lenny
1 year ago
But how did you calculate that? Can you explain your rationale?
NI
Nickolas
1 year ago
Hmm, this seems straightforward. The only costs are the set-up and quality inspection costs, and the new customer is offering $28 per unit. Can't be that simple, can it? I'll need to double-check my work.
GA
Galen
1 year ago
It does seem simple, but it's always good to double-check calculations.
KA
Karl
1 year ago
Profit per unit of Product F would be $11.50
CR
Cruz
1 year ago
I agree with Willis, the profit per unit would be $3.90.
NO
Novella
1 year ago
Okay, let's see. The total production overhead is $16,050, and it's split between set-up costs and quality inspection costs. We need to find the profit per unit of Product F. Easy enough, let's do this!
SO
Sommer
1 year ago
So, the profit per unit of Product F would be $11.95 if the offer is accepted.
MI
Minna
1 year ago
Profit per unit of Product F = $11.95
NI
Nieves
1 year ago
Profit per unit of Product F = $28.00 - $16.05
BR
Brynn
1 year ago
Profit per unit of Product F = $28.00 - ($6.45 + $9.60)
NO
Norah
1 year ago
Profit per unit of Product F = Selling price - Total costs per unit
WI
Willis
1 year ago
I think the profit per unit of Product F would be $3.90.