Question 5 Dalton Company manufactures and sells two products. Relevant per unit

Question

Question 5


Dalton Company manufactures and sells two products. Relevant per unit data concerning each product follow.
Product

Basic
Deluxe

Selling Price $43.40 $53.75
Direct labor costs $13.40 $15.95
Machine hours 0.6 0.9







Correct.

Compute the contribution margin per machine hour for each product. (Round answers to 2 decimal places, e.g. 10.50.)
Basic $
Deluxe $










Correct.

If 1,060 additional machine hours are available, which product should Dalton manufacture?
BasicDeluxe









Incorrect.

Prepare an analysis showing the total contribution margin if the additional hours are: (1) Divided equally between the products. (2) Allocated entirely to the product identified in part (b). (If answer is zero, please enter 0. Do not leave any fields blank. Round contribution margin to 2 decimal places, e.g. 10.50.)
Divided equally between the products Basic Deluxe Total
Machine hours allocated
Contribution margin per machine hour



Contribution margin $
$
$





Allocated entirely to the product identified in the part above Basic Deluxe Total
Machine hours allocated
Contribution margin per machine hour



Contribution margin $
$
$

Explanation / Answer

Compute the contribution margin per machine hour for each product. (Round answers to 2 decimal places, e.g. 10.50.)
Basic         $50      ($43.40 - $13.40) / 0.6
Deluxe $    $42      ($53.75 - $15.95) / 0.9

If 1,060 additional machine hours are available, which product should Dalton manufacture?
Basic

Divided equally between the products
                                                 Basic Deluxe     Total
Machine hours allocated           530 530           1,060
Contribution margin per MH     $50    $42              $92
Contribution margin           $26,500   $22,260   $48,760

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