Reference no: EM133041646

Problem - Mass products A and B are manufactured in a manufacturing department. The same workers and the same installations are used for both products. The production and sales of A for 2014 budgeted at 8,000 units, that of B at 3,000 units. The management of raw material consumption for product B is 25% higher per unit than for product A. The total direct raw material consumption for 2014 was estimated at € 94,000,-. The average hourly wage of the employees is €15,- product A requires a processing time of two man hours and the product B of three man hours per unit of product. The indirect costs of the manufacturing department have been budgeted for 2014 as follows:

Variable € 75,000

Constant € 60,000

Total €135,000

For the cost price calculation, the indirect costs are passed on with a surcharge in euros per man-hour. The normal occupancy of the manufacturing department is 30,000 man-hours per year. The selling costs of products A and B are budgeted at €3,- and € 4,- per unit of product respectively. These costs are considered to be entirely variable. Product A is sold with a profit premium of €6.,- per unit and product B with a profit surcharge of €6.50 per unit.

Required -

a. Calculate the selling price of unit A.

b. Calculate the selling price of unit B.

c. Calculate the budgeted profit for 2014.