Exercise 14-41

Duo Company manufactures two products, Uno and Dos. Contribution margin data follow.

Uno Dos

Unit sales $13.00 $31.00

Less variable cost:

Direct material $7.00 $5.00

Direct labor 1.00 6.00

Variable overhead 1.25 7.50

Variable selling and administrative cost .75 .50

Total variable cost $10.00 $19.00

Unit contribution margin $3.00 $12.00

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: Which of Duo Companys products is more profitable? Explain.