Question

A business makes two products C and D with the following sales prices and cost data:
                                                               C                                 D
Selling price per unit                             $25                             $30
Direct material cost per unit                 $8                                 $7
Direct labour cost (0.5 hrs. product     $8  per unit                    $6 per hour
Variable overhead                                $1 per unit                    $2 per direct labour hour
Required
1. Determine the forecast of total costs and profits for a month when the business expects to
make and sell 1 200 units of product C and 1 800 units of product D.

Answer 1

Statement of Cost and Profit
	C	D
Selling price per unit	25	30
Number of units sold	1,200	1,800
Sales revenue	30,000	54,000
Total costs:
Direct materials	1,200 x 8 = 9,600	1,800 x 7 = 12,600
Direct labor	1,200 x 8= 9,600	1,800 x 3 = 5,400
Variable overhead	1,200 x 1 = 1,200	1,800 x 1 = 1,800
Total cost	20,400	19,800
Profit	9,600	34,200

	C	D
Total cost	$20,400	$19,800
Profit	$9,600	$34,200

For product C, Direct labor cost and variable overhead are already given in the question as $8 per unit and $1 per unit respectively. Product D uses 0.5 direct labor hours per unit and direct labor cost is $6 per hour. Thus, direct labor cost per unit of product D = 6 x 0.5

= $3

For product D , variable overhead is $2 per direct labor hour and product D uses 0.5 direct labor hour per unit.

Hence variable overhead per unit of product D = 2 x 0.5

= $1

Kindly comment if you need further assistance.

Thanks