This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Case 12-32 (continued)
4. The computation of the contribution margins and the analysis of the
best product mix are repeated here under the assumption that direct
labor costs are variable.
Solution assuming direct labor is a variable cost
Manufactured
Purchased
WVD
Drums
WVD
Drums
Bike
Frames
Selling price ...................................
$149.00
$149.00
$239.00
Variable costs:
Direct materials ...........................
138.00
52.10
99.40
Direct labor .................................
0.00
3.60
28.80
Variable manufacturing overhead ..
0.00
1.35
1.90
Variable selling and administrative
0.75
0.75
1.30
Total variable cost ..........................
138.75
57.80
131.40
Contribution margin ........................
$ 10.25
$ 91.20
$107.60
Solution assuming direct labor is a variable cost
Manufactured
WVD
Drums
Bike
Frames
Contribution margin per unit (above) (a) ..........
$91.20
$107.60
Welding hours per unit (b) ...............................
0.4 hour
0.5 hour
Contribution margin per welding hour (a) ÷ (b)
$228.00
per hour
$215.20
per hour
Trusted by Thousands of
Students
Here are what students say about us.
Resources
Company
Copyright ©2022 All rights reserved. | CoursePaper is not sponsored or endorsed by any college or university.