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Wrought Iron Park Benches Selling price per bench ................ $360,00 Cost per bench: Direct materials ...... $149.10 Direct labour ($27 per hour) 43.20 Manufacturing overhead
Wrought Iron Park Benches Selling price per bench ................" $360,00 Cost per bench: Direct materials .....". $149.10 Direct labour ($27 per hour) 43.20 Manufacturing overhead .........." 54.00 Selling and administrative expenses ....". 7170 318.00 Margin per bench........ $ 42.00 d Page 571 The park benches could be produced with existing equipment and personnel. Manufacturing overhead is allocated to products on the basis of direct labour-hours. Most of the manufacturing overhead consists of fixed common costs, such as rent on the factory building, but some of it is variable. The variable manufacturing overhead has been estimated at $2.00 per STR drum and $2.85 per park bench. The variable manufacturing overhead cost would not be incurred on drums acquired from the outside supplier. Selling and administrative expenses are allocated to products on the basis of revenues. Almost all of the selling and administrative expenses are fixed common costs, but it has been estimated that variable selling and administrative expenses amount to $1.15 per STR drum whether made or purchased and $1.95 per park bench. All of the company's employees-direct and indirect-are paid for full 40-hour workweeks and the company has a policy of laying off workers only in major recessions. Required: 1. Should the financial analysis prepared by the company be used in deciding which product to sell? Why
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