Question
The following are the selling price, variable costs, and contribution margin for one unit of each of Banner Companys three products: A, B, and C:
The following are the selling price, variable costs, and contribution margin for one unit of each of Banner Companys three products: A, B, and C:
Product | |||||||||||
A | B | C | |||||||||
Selling price | $ | 150.00 | $ | 120.00 | $ | 140.00 | |||||
Variable costs: | |||||||||||
Direct materials | 101.25 | 21.50 | 75.80 | ||||||||
Direct labour | 15.00 | 50.00 | 20.00 | ||||||||
Variable manufacturing overhead | 3.75 | 12.50 | 5.00 | ||||||||
Total variable cost | 120.00 | 84.00 | 100.80 | ||||||||
Contribution margin | $ | 30.00 | $ | 36.00 | $ | 39.20 | |||||
Contribution margin ratio | 20 | % | 30 | % | 28 | % | |||||
Due to a strike in the plant of one of its competitors, demand for the companys products far exceeds its capacity to produce. Management is trying to determine which product(s) to concentrate on next week in filling its backlog of orders. The direct labour rate is $10 per hour, and only 3,280 hours of labour time are available each week. |
Required: |
1. | Compute the amount of contribution margin that will be obtained per hour of labour time spent on each product. (Round your intermediate calculations to 1 decimal place.)
|
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