Product A Product B Total 420 sales volume (units) 270 Revenue Variable costs: 150 $1,500 $9,000 $10,500 direct materials$300 $600 Contribution margin $600 $600 $900 direct labor $1,500 $2,100 $6,900 $7,500 $6,300 $1,200 Fixed costs Profit a) Allocate the fixed costs between products A and B. Use direct labor dollars as the cost driver. allocation rate=$ allocated costs for A-$ allocated costs for B-$ per DL$ b) Compute the profit margins for products A and B: profit margin for A-$ profit margin for B$ Enter negative numbers with a minus sign, i.e., a loss of $1,000 should be entered as -1000, not as (1000) or ($1000) c) Should you drop product A or product B in the short term? Why? Keep both products both have positive contribution margirn Drop product A - it has negative profit margin Drop product A -- it has negative contribution margin Drop product A - it has smaller contribution margin than product B Should you drop product A or product B in the long term? Why? Keep both products both have positive contribution margin Drop product A -- it has negative profit margin Drop product A -- it has negative contribution margin