Solution-Determine the profit margin for trousers using ABC

Determine the profit margin for trousers using ABC

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Reference no: EM132828606

Question - Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (29%), skirts (27%), dresses (11%), and other (33%). Fleet Street has been using a volume-based rate to assign overhead to each product; the rate it uses is £2.20 per unit produced. The results for the trousers line, using the volume-based approach, are as follows:

Number of units produced	14,000
Price (all figures in £)	24.42
Total revenue	341,880
Direct materials	56,200
Direct labor	187,600
Overhead (volume-based)	30,800
Total product cost	274,600
Non manufacturing expenses	51,400
Total cost	326,000
Profit margin for trousers	15,880

Recently, Fleet Street conducted a further analysis of the trousers line of product, using ABC. In the study, eight activities were identified, and direct labor was assigned to the activities. The total conversion cost (labor and overhead) for the eight activities, after allocation to the trousers line, is as follows:

Pattern cutting	£33,060
Grading	28,200
Lay planning	27,500
Sewing	31,600
Finishing	20,900
Inspection	9,300
Boxing up	5,100
Storage	10,200

Required - Determine the profit margin for trousers using ABC.

Reference no: EM132828606

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Determine the profit margin for trousers using ABC

Reference no: EM132828606

Reference no: EM132828606

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