Question

Duo Company manufactures two products, Uno and Dos. Contribution margin data follow.

	Uno				Dos
Unit sales	$	13.00			$	31.00
Less variable cost:
Direct material	$	7.00			$	5.00
Direct labor		1.00				6.00
Variable overhead		1.25				7.50
Variable selling and administrative cost		0.75				0.50
Total variable cost	$	10.00			$	19.00
Unit contribution margin	$	3.00			$	12.00

Duo company’s production process uses highly skilled labor, which is in short supply. The same employees work on both products and earn the same wage rate.

Required:

1. Calculate the contribution margin per scarce resource for each of the products assuming an arbitrary time period for which direct laborers earn $1.00 per unit.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the contribution margin per scarce resource for each of the products assuming an arbitrary time period for which direct laborers earn $1.00 per unit. Uno Dos

2. Which of Duo Company’s products is most profitable?

Answer 1

Contribution margin is calculated by deducting total variable cost from the sales.As contribution margin change by occurring any change in level of sales or total variable cost or both. By deducting the total fixed cost from the contribution margin we get operating profit.

1 The contribution margin per scarce resources. for each of the products assuming an arbitrary time period for which direct laborers earn 81.00 per mit is calculated by using the following formula: The contribution margin per scarce resources = imit contribution margin- direct laborer earn per unit A For One Boductie The contribution margin for uno Product per scarce resources $ 1 B) For Dos Boduct The contribution, mangin Dos Product per scarce resources for = $12 8 6 $ 2. 2 Uno Product of the Duo company's product is most profitable because the ono product I has more contribution margin per scarce resources as compared to Dos Poduct.