Product D E F Direct labor SHOW SOLUTION LINK TO TEXT Product D Product E Produc

Question

Product

D

E

F

Direct labor

SHOW SOLUTION

LINK TO TEXT

Product D

Product E

Product F

LINK TO TEXT

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

Product

D

E

F

Selling price $ 197.4 $ 307.7 $ 257.8 Direct labor costs 33.6 91.8 38.4 Other variable costs 91 82 149
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 .

Explanation / Answer

Product D Product E Product F Selling price 197.4 307.7 257.8 Less: Direct labor costs 33.6 91.8 38.4 Other variable costs 91 82 149 Contribution margin per unit 72.8 133.9 70.4 Direct labor hours per unit 2.8 7.7 3.2 Contribution margin per direct labor hour 26 17.4 22 Product D should be produced.   Total contribution margin = 2500*26= $65000

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