Appendix I OPLL product information Flow- Pressure- control control Custom Sales price $47.00 $68.00 $112.00 Direct material 10.00 14.00 22.00 Direct labour1 15.00 22.50 37.50 Variable overhead2 6.00 9.00 15.00 Total variable cost 31.00 45.50 74.50 Contribution margin $16.00 $22.50 $ 37.50 Units sold 50,000 25,000 5,000 Direct labour hours per unit 1.0 1.5 2.5 Machine hours per unit 0.1 0.2 2.0 Notes: 1. The standard labour rate is $15.00 per hour. 2. Variable overhead includes small tools, lubricants, and indirect labour charges. It is applied at a rate of 40% of direct labour. Appendix II OPLL income statement For the year ended December 31, 2020 Flow- Pressure- control control Custom Total Volume (units) 60,000 25,000 6,000 80,000 Sales price $47 $68 $112 Revenue $2,350,000 $ 1,700,000 $560,000 $4,610,000 Variable costs: Direct material 500,000 350,000 110,000 960,000 Direct labour 750,000 562,500 187,500 1,500,000 Variable overhead 300,000 225,000 75,000 600,000 Total variable costs 1,550,000 1, 137,500 372,500 3,060,000 Contribution margin 800,000 562,500 187,500 1,550,000 Fixed costs: Engineering2 40,000 30,000 10,000 80,000 Quality control 65,000 48,750 16,250 130,000 Depreciation3 407,500 305,625 101,875 815,000 Other manufacturing 125,000 62,500 12,500 200,000 Selling and administrative 78, 125 39,063 7,812 125,000 Total fixed costs 715,625 485,938 148,437 1,350,000 Net income $84,375 $76,562 $39,063 $200,000 Net income/revenue 3.6% 4.5% 7.0% 4.3% Notes: 1. It has been reliably determined that variable overhead is a function of direct labour dollars. 2. Engineering and quality control are allocated to products based on their relative proportion of total direct labour dollars. 3. Depreciation is allocated to products based on their relative proportion of total direct labour dollars. The depreciation charge includes $125,000 of R&D costs associated with the knife- gate valve. Because this product is not likely to be launched in the near future, it was decided to expense these costs. 4. Other fixed manufacturing overhead and fixed selling and administrative expenses are allocated to products based on the number of units sold