Playtime Electronics Produces Two Kinds of Electronic Toys,Wizards and Gizmos

question 127

Essay

Playtime Electronics produces two kinds of electronic toys,Wizards and Gizmos.During the current period,8,000 Wizards and 16,000 Gizmos were produced and sold,generating revenues of $500,000 and $2,000,000,respectively.Unit production costs for the two toys are $50 for Wizards and $70 for Gizmos.In calculating the cost of goods sold,Playtime uses activity-based costing to allocate its overhead costs.However,upstream costs of $240,000 are allocated equally to the two products.
Required:
1)Compute the total net profit for each product and for the firm as a whole.
2)Would you advise eliminating either toy? Why or why not?

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Definitions:

Pyrimidine

A heterocyclic aromatic organic compound, similar to benzene and pyridine, containing nitrogen atoms at positions 1 and 3 in the ring.

Benzofuran

An organic compound that consists of a fused benzene and furan ring, often serving as a core structure in various pharmaceuticals and organic materials.

Indole

An aromatic heterocyclic organic compound with a bicyclic structure, consisting of a benzene ring fused to pyrrole.

Aromatic

Refers to organic compounds that contain one or more planar rings of atoms with delocalized pi electrons, exhibiting special stability.