Answered: Surf Company can sell all of the two…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 1Q: Define and explain contribution margin on a per unit basis.

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Question

Surf Company can sell all of the two surfboard models it produces, but it has only 412 direct labor hours available. The Glide model requires 2 direct labor hours per unit. The Ultra model requires 4 direct labor hours per unit. Contribution margin per unit is $212 for Glide and $324 for Ultra.

(a) Compute the contribution margin per direct labor hour for each product.
(b) Determine the best sales mix and the resulting contribution margin.

Required A
Required B
Compute the contribution margin per direct labor hour for each product.
Glide
Ultra
Contribution margin per direct labor hour

Required A
Required B
Determine the best sales mix and the resulting contribution margin.
Glide
Ultra
Number of units
Contribution margin

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