Hopscotch Limited, a manufacturer of a variety of products, uses an activity-based costing system. Information from its system for the year for all products follows: Hopscotch Limited makes 440 of its product B63 a year, which requires a total of 33 machine hours, 13 inspection hours, and 17 orders. Product B63 requires $52.70 in direct materials per unit and $62.20 in direct labor per unit. Product B63 sells for $255 per unit. What is the profit margin in total for Product B63? (Round all answers to two decimal places.)

Question

Hopscotch Limited, a manufacturer of a variety of products, uses an activity-based costing system. Information from its system for the year for all products follows:  Hopscotch Limited makes 440 of its product B63 a year, which requires a total of 33 machine hours, 13 inspection hours, and 17 orders. Product B63 requires $52.70 in direct materials per unit and $62.20 in direct labor per unit. Product B63 sells for $255 per unit. What is the profit margin in total for Product B63? (Round all answers to two decimal places.)

Quizplus · Accepted Answer

To calculate the profit margin for Product B63, we need to first calculate the total cost per unit:
Total cost per unit = direct materials cost + direct labor cost + overhead cost
Overhead cost = (machine hours x cost per machine hour) + (inspection hours x cost per inspection hour) + (number of orders x cost per order)
Using the information from the table, we can calculate the overhead cost per unit:
Overhead cost per unit = (33 machine hours x $6.90 per machine hour) + (13 inspection hours x $12.50 per inspection hour) + (17 orders x $60 per order) / 440 units
Overhead cost per unit = $11.17
Total cost per unit = $52.70 + $62.20 + $11.17 = $126.07
Profit per unit = selling price per unit - total cost per unit
Profit per unit = $255 - $126.07 = $128.93
Profit margin = (profit per unit / selling price per unit) x 100%
Profit margin = ($128.93 / $255) x 100% = 50.53%
Total profit margin for Product B63 = profit margin x number of units
Total profit margin for Product B63 = 50.53% x 440 units x $255 = $59,901.53
Therefore, the correct answer is D.

Hopscotch Limited, a Manufacturer of a Variety of Products, Uses