Dalton Inc. produces and sells three products. Unit data concerning each product
ID: 2467357 • Letter: D
Question
Dalton Inc. produces and sells three products. Unit data concerning each product is shown below. The company has 2,200 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. Determine the number of direct labor hours per unit. (Round answers to 1 decimal place, e.g. 1.5.) Determine the contribution margin per direct labor hour. Determine which product should be produced. Determine the total contribution margin for that product.Explanation / Answer
Part D Part E Part F $ $ $ Selling Price 215.6 340.4 276 Direct labour cost 31.2 92.4 37.2 Other Variable Cost 109 94 152 Labour Hours available 2200 Directly Labour rate $ 12/hour 1 No. of Direct Labour hours per Unit Part D Part E Part F $ $ $ Labour Cost 31.2 92.4 37.2 Labour Hour Rate/hr 12 12 12 No. of Direct Labour hours 2.6 7.7 3.1 (Labour cost/Labour hr Rate) 2 Contribution margin per labour hour Part D Part E Part F $ $ $ Selling Price 215.6 340.4 276 Variable Cost Direct labour cost 31.2 92.4 37.2 Other Variable Cost 109 94 152 Variable Cost 140.2 186.4 189.2 Contribution per unit 75.4 154 86.8 Labour Hours per unit 2.6 7.7 3.1 Contribution margin per labour hour 29.00 20.00 28.00 3 Product should be produced Part D Part E Part F No of Hours available 2,200 2,200 2,200 Labour hours required per unit 2.6 7.7 3.1 Maximum possible production 846 286 710 Contribution margin per unit 75.4 154 86.8 Total Contribution 63,800 44,000 61,600 Remark :- Product D should be produced as it has major contribution and also the contribution margin per hour will be higer in production of D. And Its total contribution margin is $ 63800.
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