WileyPLUS WileyPLUS Exercise 19-12 Exercise 19-12 Dalton Inc. produces and sells
ID: 2397750 • Letter: W
Question
WileyPLUS WileyPLUS Exercise 19-12 Exercise 19-12 Dalton Inc. produces and sells three products. Unit data concerning each product is shown below. Product Selling price Direct labor costs $201.9 32.4 102 $302.3 92.4 79 $254.0 38.4 142 Other variable costs 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 $12. Determine the number of direct labor hours per unit. (Round answers to i decimal place, e.g. 1.5.) Direct labor Product D Product E Product F hours per unit hours per unit hours per unit ct labor hour. (Round intermediate calculation and final Determine the contribution margin per dire answers to 1 decimal place, e.g. 52.7.Explanation / Answer
(a)Number of Labor hours per unit
Number of Labor hours per unit = Direct Labor costs / Direct labor hourly rate
Product D = $32.4 / $12 = $2.7 hours per unit
Product E = $92.4 / $12 = $7.7 hours per unit
Product F = $38.4 / $12 = $3.2 hours per unit
(b)Contribution margin per direct labor hour
Contribution margin per direct labor hour
= [Selling price – Direct Labor cost – Variable cost ] / Number of Labor hours per unit
Product D
= [$201.90 – 32.4 – 102 ] / 2.70
= $25
Product E
= [ 302.3 – 92.4 – 79 ] / 7.70
= $17
Product F
= [ 254 – 38.4 – 142 ] / 3.2
= $23
(c)Determine which product should be produced
“ PRODUCT D “ produces the highest contribution margin
(d) Total contribution margin for that product
Total Units produced = 2,500 hours / 2.7 units per hour = 923 Units
Contribution per unit = [ 201.90 – 32.40- 102 ] = $67.50 per unit
Therefore, Total Contribution for Product D
= 923 Units x $67.50 per unit
= $62,303
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