Unitron Corporation

1 Produced As/Sold As

Annual Sales Order (Units) Product Annual Production

100,000.00 401 90,000.00
402 10,000.00
140,000.00 402 110,000.00
403 30,000.00
100,000.00 403 60,000.00
404 40,000.00
40,000.00 404 20,000.00
405 20,000.00
20,000.00 405 20,000.00
Total 400,000.00 Equal 400,000.00

2 Average Costing System

Total Manufacturing Cost / Output Produced 0.50
(200.000/400.000)
Product Cost / Unit
401 0.50
402 0.50
403 0.50
404 0.50
405 0.50

Sales Value System

Product Unit Ordered Sales Price / Unit Percent of Market Value Percent Sales Value Allocated Join Cost
401 100,000.00 0.40 40,000.00 16% 32,520
402 140,000.00 0.60 84,000.00 34% 68,293
403 100,000.00 0.70 70,000.00 28% 56,911
404 40,000.00 0.80 32,000.00 13% 26,016
405 20,000.00 1.00 20,000.00 8% 16,260

Total 400,000.00 246,000.00 100.00% 200,000.00

Product Allocated Join Cost Unit Produced Cost / Unit

401 32,520 90,000.00 0.36
402 68,293 120,000.00 0.57
403 56,911 90,000.00 0.63
404 26,016 60,000.00 0.43
405 16,260 40,000.00 0.41
200,000.00 400,000.00

3 What if 6000 ordered for product 401

A.
Revenue 6000 x 0.40 $2,400.00

Physical Unit
Because there is still beginning inventory, It should be counted
Beginning Inventory 3,000.00
Cost / Unit 0.50
$1,500.00
Unit Sales 3,000.00
Cost / Unit 0.36
$1,080.00
Total Cost $2,580.00

Profit (Loss) ($ (180.00)

Sales Value

Total Cost 6000 x 0.36 $2,160.00

 Profit (Loss) ($ 240.00)

B
Helen should took the Sales Value Split-Off Method.
The simplest reason why helen choose this method, because it make a proft for the company
The sales value method gives $240 in profit, meanwhile with the physical unit gives $180 in loss.

4 Maybe, Helen might be considered to accept the offer from the toys company.
In the information said that Unitron offered a "seconds" at a price $25. definitely,
offering from the toys company below the standard price stated by Unitron.
But, there is no doubt to try accept the offer. Moreover, this item is a slow moving in a past year.

5 Considering from the number 3, Unitron should imply the relative sales value approach.
Using this approach, Unitron can identified cost/unit more precisely. So they know how
much it cost allocation out per product.

6 A government purchasing agent inquirred 404 for 100.000

They stated that 10% profit margin would probably allowable.

If Unitron use 2 of approaches (Physical and Relative Sales)

Cost / Unit Cost / Unit (Exhibit 4) Profit Margin

Physical Unit 0.50 0.80 0.30
Relative Sales 0.43 0.80 0.37

Inquirred 10 percent of profit margin

Profit Margin Cost / Unit after margin Profit Margin after include 10% Different profit Margin Percentage of Changes
Physical Unit 10% 0.55 0.05 ($ (0.25) -83.33%
Relative Sales 10% 0.47 0.04 ($ (0.33) -88.38%

According to the table shown above, I think they should not to accept the offer from the government. Because the decreased profit is significant.
But, it goes back to the management's decision.