Question
Duo Company manufactures two products, Uno and Dos. Contribution margin data follow. Uno Dos Unit sales $ 14.00 $ 39.00 Less variable cost: Direct material
Duo Company manufactures two products, Uno and Dos. Contribution margin data follow.
| Uno | Dos | ||||||
| Unit sales | $ | 14.00 | $ | 39.00 | |||
| Less variable cost: | |||||||
| Direct material | $ | 6.00 | $ | 7.00 | |||
| Direct labor | 1.00 | 6.00 | |||||
| Variable overhead | 1.15 | 7.70 | |||||
| Variable selling and administrative cost | .85 | .30 | |||||
| Total variable cost | $ | 9.00 | $ | 21.00 | |||
| Unit contribution margin | $ | 5.00 | $ | 18.00 | |||
Duo companys production process uses highly skilled labor, which is in short supply. The same employees work on both products and earn the same wage rate. Required: 1. Calculate the contribution margin per scarce resource for each of the products assuming an arbitrary time period for which direct laborers earn $1.00 per unit. 2. Which of Duo Companys products is most profitable?
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Accounting A Business Perspective
Authors: Roger H. Hermanson, James Don Edwards, Michael W. Maher
7th Edition
0075615851, 978-0075615859
