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2 products A and B are produced in a process. Data for the process for the last period are as follows:
Product A:(sales 480 tonnes) (production 600 tonnes)
Product B: (sales 320 tonnes) (production 400 tonnes)Common production costs in a period were $12000. There was no opening inventory. Both products had a gross profit margin 40%. Common production costs were apportioned on a physical basis.
What was the gross profit for product A in the period?
A $2304
B $2880
C $3840
D $4800The correct answer is C
I have been able to calculate cost for product A by ( 600/1000 tonnes X $12000 = $7200) but my answer as D that is the wrong answer. I have calculated (40/60 X $7200= $4800)
Can you please sir explain to me my errors, thank you.
The cost for Product A is indeed $7,200. Therefore it is 7,200/600 = $12 per tonnes.
However they only make profit when the goods are actually sold.
Since they sold 480 tonnes, the profit is 480 x (40/60 x $12) = $3,840
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