Part 1

Given the following information, what is the predetermined overhead rate per unit using direct labor hours as an application base? And what is the contribution margin per unit if overhead is applied using expected direct labor hours as a base?

Data: Sales price per unit.....................$200 Direct materials per unit...............$100 Direct labor per hour....................$30 Direct labor hour needed per unit....2 hours Number of units to be produced.....40,000 Total estimated OH..................$200,000

Part 2

Continuing with this same scenario, assume that the following activities incur various OH costs:

Cutting...................$100,000 based on 80,000 cuts Assembly................$ 75,000 based on 160,000 parts Inspection................$25,000 based on 1,000 inspections

What would the Contribution marginper unitbe, given the information above (and below) using ABC?

Sales price per unit.....................$200 Direct materials per unit...............$100 Direct labor per hour....................$30 Direct labor hour needed per unit....2 hours Number of units to be produced.....40,000 Total estimated OH..................$200,000

Cutting necessary......................2 cuts needed per unit Assembly................................4 assembly parts per unit Inspection...............................1 inspection per unit