Hello, I have a question about the solution to this managerial accounting problem. For question A, the solution posted uses $39 for direct labor. Deluxe selling price is $230 per unit and direct material cost is $55 per unit but it looks like direct labor is $39 per hour (5070/130). Per production information given, it looks like each unit requires 3 hours of direct labor. Are we not supposed to use all costs per unit? If not, what is the reason we are only using 1 hour's cost for direct labor in the calculation of the contribution margin?

Exercises 5-15 Page 141 (6 points) Sigma Company produces three versions of a brass desk lamp: basic, custom, and deluxe. The planned production information for the upcoming month follows: Cost per Fringe Hours per Resources Month Benets Total Month Direct labor $4,270 $800 _ Indirect labor cost $4,210 $600 4,810 130 Machinery: $50,000 $50,000 250 Basic Custom Deluxe Selling price per unit $170 $190 $230 Direct materials cost per unit $40 $50 $55 Production Information Basic Custom Deluxe Production and sales volume (units) 4,500 3,200 I I Direct labor hours per unit 2.00 2.50 Total direct labor hours 9,000 8,000 3,600 Machine hours per unit 0.05 0.08 0.09 Total machine run time (hours) 225 256 108 Number of production runs 12.00 10.00 8.00 Setup time per production run [machine hours) 2.00 1.00 2.50 Total setup time {machine hours] 24.00 10.00 20.00 Total machine hours 249 266 128 Indirect labor data Setup time per run (hours) 3.00 4.00 6.00 Number of employees per setup 4 4 4 Indirect labor hours per setup 12.00 16.00 24.00 In order to meet anticipated demand for the upcoming month, Sigma Company plans to rent three machines, each costing $50,000 per month, and hire four indirect workers, each costing $4,810 per month. The total cost of the three machines and four indirect workers comprises the total overhead cost at Sigma Company. Required a. Given the production plan, what is the deluxe product's planned total contribution margin? Stepbytep explanation A. Solution: Contribution Mar-in is com-uteri by deducting the variable cost from the selling price. Deluxe is selling at $ 230, direct material cost is $55 an: direct labor is 39. herefore contribution margin per unit will be $136[ 230-5539}. Multiply the contribution margin per unit to the sa es vo ume o , I0 units you will get $163,200 [ $136 x1200 units}