QUESTION

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# A company manufactures two products $\mathrm{A}$ and $\mathrm{B}$. 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. \begin{tabular}{lcc} & $\begin{array}{c}\text { Product A } \\ \$\end{array}$&$\begin{array}{c}\text { Product B } \\ \$\end{array}$ \\ \hline Selling price per unit & 46 & 62 \\ Production costs per unit: & & \\ Material costs & 18 & 16 \\ Labour costs & 4 & 10 \\ Overhead costs & $\underline{8}$ & $\underline{\underline{12}}$ \\ Profit per unit & $\underline{\underline{16}}$ & $\underline{-}$ \\ Additional information: & 6000 & 8000 \\ Estimated sales demand (units) & 0.5 & 0.8 \\ Machine hours per unit & & \end{tabular} 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 $\$ 248000\$. No inventories are held of either product. Required: a. Calculate the return per machine hour for each product if a throughput accounting approach is used. b. Calculate the profit for the period, using a throughput accounting approach, assuming the company prioritizes Product B.  