21.4A ProblemChapter 21 Incremental AnalysisModel 100Model 1013,$200$215Sales price per unitCosts and expenses per unit:$51$38venDirect materials3330Direct laborManufacturing overhead (applied at the rate of$18 per machine-hour, V3 of which is fixedand 2/3 variable)36723015Variable selling expenses150155Total costs and expenses per unit.$ 50$ 60Profit per unitMachine-hours required to produce one unit2Total manufacturing overhead amounts to $180,000 per month, one-third of which is fixed. Thedemand for either product is sufficient to keep the plant operating at full capacity (10,000 machine-hours per month). Assume that only one product is to be produced in the future.Instructionsa. Prepare a schedule showing the contribution margin per machine-hour for each product.D. Explain your recommendation as to which of the two products should be discontinued.LouieInsiteful two of for each is as follows.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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21.4A

Problem
Chapter 21 Incremental Analysis
Model 100
Model 101
3,
$200
$215
Sales price per unit
Costs and expenses per unit:
$51
$38
ven
Direct materials
33
30
Direct labor
Manufacturing overhead (applied at the rate of
$18 per machine-hour, V3 of which is fixed
and 2/3 variable)
36
72
30
15
Variable selling expenses
150
155
Total costs and expenses per unit.
$ 50
$ 60
Profit per unit
Machine-hours required to produce one unit
2
Total manufacturing overhead amounts to $180,000 per month, one-third of which is fixed. The
demand for either product is sufficient to keep the plant operating at full capacity (10,000 machine-
hours per month). Assume that only one product is to be produced in the future.
Instructions
a. Prepare a schedule showing the contribution margin per machine-hour for each product.
D. Explain your recommendation as to which of the two products should be discontinued.
Louie
Insiteful two of for each is as follows.

Expert Solution

Step 1:-Computation of Schedule showing the contribution margin per machine hour for each product

Solution:-1

Computation of Schedule showing the contribution margin per machine hour for each product

Sl.no	Particulars	Model 100	Model 101
a	Sales price per unit	$ 200.00	$ 215.00
b	Less: -Variable cost per unit
c	Direct material	$ 51.00	$ 38.00
d	Direct labor	$ 33.00	$ 30.00
e	Manufacturing overheads
f	Model 100=18 x 2 x2 \3) or (36 x 2 \ 3)	$ 24.00
g	Model 100=18 x 4 x2 \3) or (72 x 2 \ 3)		$ 48.00
h	Variable selling expenses	$ 30.00	$ 15.00
i	Total variable cost (c to h)	$ 138.00	$ 131.00
j	Contribution margin per unit (a-I )	$ 62.00	$ 84.00
k	Machine hours required to produce one unit	$ 2.00	$ 4.00
l	Contribution margin per machine hour (j \ k)	$ 31.00	$ 21.00

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