Moctezuma Inc. produces and sells three products. Unit data concerning each prod

Question

Moctezuma Inc. produces and sells three products. Unit data concerning each product is shown below.

D E F
Selling price $230.50 $368.20 $280.70
Direct labor costs 37.80 107.80 46.20
Other variable costs 109.00 91.00 152.0

The company has 2,500 hours of labor available to build inventory in anticipation of the company's peak season. Management is trying to decide which product should be produced. The direct labor hourly rate is $14.

Determine the number of direct labor hours per unit:
Product D:
Product E:
Product F:

Determine the contribution margin per direct labor hour:
Product D: $
Product E: $
Product F: $

Explanation / Answer

Determine the number of direct labor hours per unit:
Product D: 37.80/14 = 2.7
Product E: 107.80/14 = 7.7
Product F: 46.20/14 = 3.3

Determine the contribution margin per direct labor hour:
Product D: $ (230.50 – 37.80 – 109.00)/2.7 = $31.00
Product E: $ (368.20 – 107.8 – 91)/7.7 = $22.00
Product F: $ (280.70 – 46.20 – 152.00)/3.3 = $25.00

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