Use the following contribution margin statement: Product A Product
B Total
sales volume (units)
100 180
280
Revenue $16000
$96000 $112000
Variable costs:
direct materials $3200 $6400
$9600
direct labor $6400
$16000 $22400
Contribution margin $6400
$73600 $80000
Fixed costs
$67200
Profit $12800 Required: (a) allocate the shared fixed costs ($67200) among product A and product B using direct labor dollars as the allocation basis.
allocation rate=$_________________ per DL$
FC allocated to A=$_______________
FC allocated to B=$_________________ (b) using the allocated costs from (a) compute the profit margin for product A and product B.
If you get a negative number enter it with a minus sign i.e. enter negative $1000 as -1000 not as ($1000)
profit margin for A=$________________
profit margin for B=$________________ c) based on the profit margins from (b) should you kill product A or product B in the long term? Explain your decision.