Hoctor Industries Wishes to Determine the Profitability of Its Products

Essay

Hoctor Industries wishes to determine the profitability of its products and asks the cost accountant to make a comparative analysis of sales, cost of sales and distribution costs of each product for the year. The accountant gathers the following information which will be useful in preparing the analysis: Advertising expenses total $100,000, with 60% being expended to advertise the Deluxe model. The representatives commissions are 5% and 7% for the standard and deluxe models, respectively. The sales manager's salary of $50,000 is allocated evenly between products. Other miscellaneous selling costs are estimated to be $6 per order received.
(a) Compute the selling cost per unit.
(b) Prepare an analysis for Hoctor Industries that will show in comparative form the income derived from the sale of each unit for the year.