Question

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

		Product
		D		E		F
Selling price		$197.3		$317.6		$253.4
Direct labor costs		35.1		98.8		40.3
Other variable costs		92		82		148

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 $13.

Determine the number of direct labor hours per unit. (Round answers to 1 decimal place, e.g. 1.5.)

		Direct labor
Product D			hours per unit
Product E			hours per unit
Product F			hours per unit

eTextbook and Media

  

  

Determine the contribution margin per direct labor hour. (Round intermediate calculation and final answers to 1 decimal place, e.g. 52.7.)

		Product D		Product E		Product F
Contribution margin per direct labor hour		$		$		$

eTextbook and Media

  

  

Determine which product should be produced.                                                                       Product DProduct EProduct F

Determine the total contribution margin for that product.

Total contribution margin

$

Answer 1

Determine the number of direct labor hours per unit. (Round answers to 1 decimal place, e.g. 1.5.)

		Direct labor
Product D		35.10/13	= 2.7 hours per unit
Product E		98.8/13	= 7.6 hours per unit
Product F		40.30/13	= 3.1 hours per unit

Determine the contribution margin per direct labor hour. (Round intermediate calculation and final answers to 1 decimal place, e.g. 52.7.)

		Product D		Product E		Product F
Contribution margin per direct labor hour		$70.20/2.7 = 26		$136.80/7.6 = 18		$65.10/3.1 = 21

  

Determine which product should be produced. = Product D

Determine the total contribution margin for that product.

Total contribution margin

2500*26

$65000