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Company XYZ manufactures two products A and B. The data about its costs and contribution margin are shown below: (figures in USD) A B Sell
Company XYZ manufactures two products A and B. The data about its costs and contribution margin are shown below: (figures in USD)
A | B | |
Sell price | $ 50.00 | $ 35.00 |
Direct Material | $ 20.00 | $ 18.00 |
Direct skilled labor ($ 12 hour) | $ 12.00 | $ 4.00 |
Variable manufacturing overhead | $ 5.50 | $ 2.50 |
Variable administration and sales expenses | $ 1.75 | $ 1.20 |
Unit contribution margin | $ 10.75 | $ 9.30 |
Both products require the use of highly specialized labor, which is currently in short supply.
Which of the two products is more profitable considering the shortage of skilled labor? Justify your answer with an analysis.
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