Home Model Deluxe Model Pro Model $ 80 19 20 $ 65 Selling price Dir ect material Dir ect labor ($10 per hour) $ 58 16 20 10 15 Variable overhead 8 12 16 Fixed overhead 16 15

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Carpenter's Mate, Inc. manufactures electric carpentry tools. The Production Department has met all production requirements for the current month and has an opportunity
to produce additional units of product with its excess capacity. Unit selling prices and
unit costs for three dierent drill models are as follows(figure)

Variable overhead is applied on the basis of direct-labor dollars, while fixed overhead
is applied on the basis of machine hours. There is sufficient demand for the additional
production of any model in the product line

 

Calculate the contribution margin per unit for each model

If Carpenter's Mate, Inc. has excess machine capacity and can add more labor as needed
(i.e., neither machine capacity nor labor is a constraint), the excess production capacity
should be devoted to producing which product? (Assume that the excess capacity will be
used for a single product line.)

Calculate the contribution margin per direct-labor hour for each model.

If Carpenter's Mate has excess machine capacity but a limited amount of labor time, the
excess production capacity should be devoted to producing which product or products?

Home Model
Deluxe Model
Pro Model
Selling price
$ 58
$ 65
$ 80
Dir ect material
16
20
19
Dir ect labor ($10 per hour)
10
15
20
Variable overhead
8
12
16
Fixed overhead
16
5
15
Transcribed Image Text:Home Model Deluxe Model Pro Model Selling price $ 58 $ 65 $ 80 Dir ect material 16 20 19 Dir ect labor ($10 per hour) 10 15 20 Variable overhead 8 12 16 Fixed overhead 16 5 15
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