Weygandt, Managerial Accounting, 7e MANAGERIAL ACCOUNTING (ACCT 1 Assignment Gra

Question

Weygandt, Managerial Accounting, 7e MANAGERIAL ACCOUNTING (ACCT 1 Assignment Gradebook ORION Downloadable eTextbook ment BACK NEX CALCULATOR FULL SCREEN Question 1 Dalton Inc. produces and sells three products. Unit data concerning each product is shown below. Product Selling price Direct labor costs Other variable costs $193.8 30.8 93 $298.9 85.3 78 $245.4 34.1 140 The company has 1,900 should be produced. The direct labor hourly rate is $11. hours of labor available to build inventory in anticipation of the company's peak season. Management is trying to decide which product Determine the number of direct labor hours per unit. (Round answers to 1 decimal place, e.g. 1.5.) Direct labor hours per unit hours per unit hours per unit Product E Product F LINK TO TEXT VIDEO: SIMILAR EXERCISE Determine the contribution margin per direct labor hour. (Round intermediate calculation and final answers to 1 decimal place, e.g. 52.7.) Product D Product E Product F ey & Sons, Inc. All Rights R A Division

Explanation / Answer

Answer to Part 1.

Direct Labors per Unit = Direct Labor Cost / Direct Labor Hourly Rate

Product D:
Direct Labors per Unit = 30.80 / 11
Direct Labors per Unit = 2.8 Hours per Unit

Product E:
Direct Labors per Unit = 85.3 / 11
Direct Labors per Unit = 7.8 Hours per Unit

Product F:
Direct Labors per Unit = 34.1/11
Direct Labors per Unit = 3.1 Hours per Unit

Answer to Part 2.

Contribution Margin per Direct Labor Hour = Contribution Margin / Direct Labor Hours per unit
Contribution Margin = Sales – Variable Cost

Product D:
Variable Cost = $30.8 + $93 = $123.80
Contribution Margin = $193.80 - $123.80 = $70

Contribution Margin per Direct Labor Hour = 70 / 2.8
Contribution Margin per Direct Labor Hour = $25

Product E:
Variable Cost = $85.3 + $78 = $163.30
Contribution Margin = $298.90 - $163.30 = $135.60

Contribution Margin per Direct Labor Hour = 135.60 / 7.8
Contribution Margin per Direct Labor Hour = $17.4

Product F:
Variable Cost = $34.1 + $140 = $174.1
Contribution Margin = $245.40 - $174.10 = $71.30

Contribution Margin per Direct Labor Hour = 71.30 / 3.1
Contribution Margin per Direct Labor Hour = $23

Answer to Part 3.

Product D should be produced, as it has highest Contribution Margin per Direct Labor Hour as compared to other two Products.

Total Units Produced = Available Labor Hours / Direct Labor Hours per unit
Total Units Produced = 1,900 / 2.8
Total Units Produced = 679 units
Total Revenue = Sales * Units Produced
Total Revenue = 679 * $193.80
Total Revenue = $131,590.20

Total Variable Cost = Total Direct Labor Cost + Total Other Variable Costs
Total Variable Cost = ($30.80 * 679) + ($93.00 * 679)
Total Variable Cost = $84,060.20

Total Contribution Margin for the Product = $131,590.20 - $84,060.20
Total Contribution Margin for the Product = $47,530.00

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