Product cost abc company believes that it has an additional

Assignment Help Accounting Basics

Reference no: EM13587917

Product cost: ABC Company believes that it has an additional 5,000 machine hours available in the current facility before it would need to expand. ABC Company uses machine hours to allocate the fixed factory overhead, and units sold to allocate the fixed sales expenses. Bases on current research, ABC Company expects that it will take twice as long to produce the expansion product as it currently takes to produce its existing product.

a. What is the product cost for the expansion product under absorption and variable costing?
b. By adding this new expansion product, it helps to absorb the fixed factory and sales expenses. How much cheaper does this expansion make the existing product?
c. Assuming ABC Company wants a 40% gross margin for the new product, what selling price should it set for the expansion product?
d. Assuming the same sales mix of these two products, what are the contribution margins and break-even points by product?

ABC's Product information
	Current Product	Expansion Product (estimate)
Selling Price	$14.50	?
Units produced and expected to be sold	80,000	5,000
Machine Hours	40,000	5,000
Direct Materials	$1.30 per unit	$5.60 per unit
Direct labor dollars needed per product	$2.80 per unit	$4.00 per unit
Variable Factory Overhead	$1.00 per Machine Hour	$1.00 per Machine Hour
Variable Selling Expense	$0.20 per unit	$0.20 per unit


Total Fixed Costs:
Fixed Factory Overhead	$ 198,000
Fixed Selling expenses	$ 191,250

Reference no: EM13587917

Questions Cloud

The cash account for bonita medical co at september 30 2008 : the cash account for bonita medical co. at september 30 2008 indicated a balance of 533530. the bank statement

Bonds with the following characteristics are retired on : bonds with the following characteristics are retired on january 1 2005 at 104 issue date january 1 2004 maturity date

During 2013 credit sales were 1790000 cash collections from : raintree cosmetic company sells its products to customers on a credit basis. an adjusting entry for bad debt expense is

Dans hardware is a small hardware store in the rural : dans hardware is a small hardware store in the rural township of twin bridges. it rarely extends credit to its

Product cost abc company believes that it has an additional : product cost abc company believes that it has an additional 5000 machine hours available in the current facility before

Handy home sells windows and doors in the ratio of 73 : handy home sells windows and doors in the ratio of 73 windowsdoors. the selling price of each window is 105 and of each

Phil collins realty corporation purchased a tract of : phil collins realty corporation purchased a tract of unimproved land for 51000. this land was improved and subdivided

The dean of the school of natural science is trying to : the dean of the school of natural science is trying to decide whether to purchase a copy machine to place in the lobby

What amount would msi report as cash and cash equivalents : the bank statement for the checking account of management systems inc. msi showed a december 31 2013 balance of

User Account

All Pages