Halfway Industries Produces Two Products The Company's Fixed Costs Totaled $140,000, of Which $30,000 Can

question 61

Essay

Halfway Industries produces two products. Information about the products is as follows:
$\begin{array}{lrr}&\text { Clocks}&\text { Headphone:}\\\text { Units produced and sold } & 8,000&20,000\\\text { Selling price per unit } & \$ 16 &\$14\\\text { Variable costs per unit } & 10&9\end{array}$

The company's fixed costs totaled $140,000, of which $30,000 can be directly traced to Clocks and $90,000 can be directly traced to Headphones.
Required:
The effect on the firm's profits if the Headphone product is dropped would be:

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Definitions:

First Stage Allocations

The process of assigning indirect costs to different departments or cost centers within a business.

Equipment Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting the decrease in value due to use, wear and tear, or obsolescence.

Supervisory Expense

Costs associated with managerial or oversight activities within an organization, typically involving salaries and benefits of supervising staff.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities related to production.