Optical Instruments produces two models of binoculars. Information for each model is as follows:

Total manufacturing overhead amounts to \(\$ 180,000\) per month, one-third of which is fixed. The demand for either product is sufficient to keep the plant operating at full capacity ( 10,000 machinehours per month). Assume that only one product is to be produced in the future.

Instruction

a. Prepare a schedule showing the contribution margin per machine-hour for each product.

b. Explain your recommendation as to which of the two products should be discontinued.

Transcribed Image Text:

Model 100 Model 101 Sales price per unit Costs and expenses per unit: Direct materials. $200 $135 $51 $38 Direct labor 33 30 Manufacturing overhead (applied at the rate of $18 per machine-hour, % of which is fixed and % variable).. 36 Variable selling expenses 30 Total costs and expenses per unit 150 Profit per unit Machine-hours required to produce one unit 18 15 101 $ 50 $ 34 2