Cost Accounting

ABC produces two basic types of equipment. Model A and Model B. Relevant data are as follows: Per unit Model A Selling price: $135 Costs Direct material 24 Variable direct manufacturing overhead 11 Variable manufacturing overhead 22 Fixed manufacturing overhead* 10 Marketing (all varialbe) 19 Total costs 86 Operating income 49 Per unit Model B Selling price: $95 Costs Direct material 12 Variable direct manufacturing overhead 22 Variable manufacturing overhead 11 Fixed manufacturing overhead 5 Marketing (all varialbe) 5 Total costs 55 Operating income 40 *Allocated on the basis of machine-hours Does Model A or Model B have a higher contributi a) Model A b) Model B c) The contribution margin per unit is the same Does Model A or Model B have a high contribution margin per machine hour? a) Model A b) Model B c) The contribution margin per machine hour is the same Should ABC manufacture Model A or Model B to maximize profit? a) Model A b) Model B c) Profit will be maximized manufacturing either Model A or Model B since ABC can sell all units it produces