Handy Dandy Tools Company manufactures electric carpentry tools. The Production Department has met all production requirements for the current month and has an opportunity to produce additional units of product with its excess capacity. Unit selling prices and unit costs for three different saw models are as follows:

	Basic Model			Deluxe Model			Pro Model
Selling price	$	116		$	130		$	160
Direct material		32			40			38
Direct labor ($20 per hour)		20			30			40
Variable overhead		16			24			32
Fixed overhead		32			10			30

Variable overhead is applied on the basis of direct-labor dollars, while fixed overhead is applied on the basis of machine hours. There is sufficient demand for the additional production of any model in the product line.

Required:

1-a.	Calculate the contribution margin per unit for each model.

1-b.

If the company has excess machine capacity and can add more labor as needed (i.e., neither machine capacity nor labor is a constraint), the excess production capacity should be devoted to producing which product? (Assume that the excess capacity will be used for a single product line.)

	Basic Model
	Deluxe Model
	Pro Model

2-a.	Calculate the contribution margin per direct-labor hour for each model.

2-b.

If the company has excess machine capacity but a limited amount of labor time, the excess production capacity should be devoted to producing which product or products?

	Basic Model
	Deluxe Model
	Pro Model