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A company manufactures two products A and B. The budget statement below was produced using...

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Accounting

A company manufactures two products A and B. The budget statement below was produced using a traditional absorption costing approach. It shows the profit per unit for each product based on the estimated sales demand for the period.

Product A ($) Product B ($)

Selling price per unit 46 62

Production costs per unit:

Material costs 18 16

Labour costs 4 10

Overhead costs 8 12

Profit per unit 16 24

Additional information:

Estimated sales demand (units) 6000 8000

Machine hours per unit 0.5 0.8

It has now become apparent that the machine which is used to produce both products has a maximum capacity of 8000 hours and the estimated sales demand cannot be met in full. Total production costs for the period, excluding direct material cost, are $248 000. No inventories are held of either product.

Required:

(i) Calculate the return per machine hour for each product if a throughput accounting approach is used.

(ii) Calculate the profit for the period, using a throughput accounting approach, assuming the company prioritizes Product B.

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