Hopscotch Limited, a manufacturer of a variety of products, uses an activityminusbased costing system. Information from its system for the year for all products follows: Activity cost pool Total cost Total activity Assembly $583,700 24,000 machineminushours Inspection $342,000 7,500 inspectionminushours Packaging $24,500 1,200 order 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.)

Profit margin= $58,581.5

Explanation:

Giving the following information:

Activity cost pool Total cost Total activity

Assembly $583,700 24,000 machine-hours

Inspection $342,000 7,500 inspection-hours

Packaging $24,500 1,200 order

B63:

n= 440

33 machine-hours

13 inspection hours

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.

First, we need to calculate the estimated overhead rate for each activity pool:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Assembly:

Estimated manufacturing overhead rate= 583,700/24,000= 24.32 per machine-hour

Inspection:

Estimated manufacturing overhead rate= 342,000/7,500= $45.6 per inspection

Packaging:

Estimated manufacturing overhead rate= 24,500/1,200= $20.42 per order

Now, we need to allocate the overhead  to product B63:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= (24.32*33) + (45.6*13) + (20.42*17)= $1,742.5

Total cost= direct material + direct labor + allocated overhead

Total cost= (52.7*440) + (62.20*440) + 1,742.5= $52,298.5

Profit margin= 440*252 - 52,298.5= $58,581.5

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