The constraint at Bulman Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:

Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product.

1.What is the contribution margin per constrained resource for each product?

2.In what order should the company produce the three products in case of a machine breakdown that limits the available processing time on the machine?

Ryland, Inc., manufactures two products, Regular and Deluxe. Ryland uses a traditional costing system and applies overhead on the basis of direct labor hours (cost driver). Anticipated overhead and direct labor time for the upcoming accounting period are $1,600,000 and 25,000 hours, respectively. Information about the company's products follows.

	REGULAR	DELUXE
Estimated total production volume	3,000 units	4,000 units
Direct materials cost (per unit)	$28	$42
Direct labor cost (per unit)	$45 (3 hrs @ $15/hr)	$60 (4 hrs @ $15/hr)

Recently, the controller of Ryland, Inc. began to wonder whether the company was accurately costing its products, so she decided to try-out activity based costing (ABC).

The controller identified three major activities: order processing, machine processing, and product inspection. These activities are driven by number of orders processed, machine hours worked, and inspection hours, respectively. Rylands budgeted total overhead of $1,600,000 is subdivided as follows: order processing, $250,000; machine processing, $1,200,000; and product inspection, $150,000.

Data relevant to these activities follow.

	Orders Processed	Machine Hours Worked	InspectionHours
Regular	320	16,000	4,000
Deluxe	180	24,000	6,000
Total	500	40,000	10,000

What is the unit cost of REGULAR under both the current costing system and ABC costing system?

Is the DELUXE product line under or over costed by the traditional costing system? Explain.