Cost Accounting and Profit Maximization Analysis

1. Unit Production Cost Calculation

To calculate the cost per unit, we allocate fixed costs (CFI) based on production hours. With a total CFI of 200,000 for 16,000 hours, the rate is 12.5 €/h.

• Product A: 12.5 €/h × 10,000 hours = 125,000 €
• Product D: 12.5 €/h × 6,000 hours = 75,000 €

Full Cost Calculation (CVfab.unit + CFI/unit):

• Product A: 22 € + (125,000 / 8,000) = 37.625 €/unit
• Product D: 32.5 € + (75,000 / 10,000) = 40 €/unit

Final Inventory Valuation

Direct costs per unit are 22 € for A and 32.5 € for D. The value of final inventory is calculated as: (Units Produced - Units Sold) × Unit Cost.

Decision Making: Eliminating Analog Products

When evaluating the elimination of a product line, consider only relevant data. We compare the contribution margin of additional digital sales against the margin lost by eliminating analog production.

• Digital Unit Contribution: 50 - 32.5 - 0.5 = 17 €
• Analog Unit Contribution: 35 - 22 - 0.35 = 12.65 €

Additional digital sales of 1,500 units generate 25,500 €. If the analog line is eliminated, the loss is 12.65 € × 7,000 units = 88,550 €. Therefore, maintaining the analog line is more profitable if capacity allows.

Break-Even Analysis

The threshold is calculated as: Fixed Costs / (Price - Variable Costs).

• Total Fixed Costs: 215,000 €
• Variable Costs (HP): 32.5 + (0.01 × 50) = 33 €
• Break-Even Point: 215,000 / (50 - 33) = 12,647.06 units

If sales exceed this threshold, the company will generate profits.

Maximizing Profitability

To maximize profit, we analyze the contribution margin per hour worked to prioritize production:

• Digital: 17 € / 0.6h = 28.33 €/h
• Analog: 12.65 € / 1.25h = 10.12 €/h
• Digital Export: 11.15 € / 0.6h = 18.58 €/h

To maximize profits using 16,000 hours of capacity, prioritize production in order of efficiency: Digital (National), Digital (Export), and finally Analog.