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

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 basedactivity-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?