Oscar Corporation produces and sells three products. Unit data concerning each p

Question

Oscar Corporation produces and sells three products. Unit data concerning each product is shown below. Product Selling price Direct labor costs Other variable costs $200 45 110 $300 75 130 $250 60 102 The company has 2,000 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 $15 Your answer is partially correct. Determine the number of direct labor hours per unit. Product X Product Y Product Z 2 hours per unit 5 hours per unit 3 hours per unit

Explanation / Answer

Calculation of number of direct labor hours per unit: Direct labor hours per unit= Direct labor cots/direct labor hour rate Product X= 45/15= 3 hours per unit Product Y= 75/15= 5 hours per unit Product Z= 60/15= 4 hours per unit Calculation of contribution per direct labor hour: Paticulars Product X Product Y Product Z Selling price 200 300 250 Less: Direct labor cost 45 75 60 Less: Other variable cost 110 130 102 Contribution( Selling price- variable costs) 45 95 88 Less: hours 3 5 4 Contribution per hour (contribution/ hours) 15 19 22 Since the contribution per hour of product Z is highest so product Z be produced. Total contribution= 22*2000= $44000

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