Question

The Righteous Brothers run a smokehouse where they process, smoke and sell turkeys, pork ribs and beef brisket. They have been allocating overhead to the product lines using direct labor hours. A consultant has recommended using smoke house hours as a better measure of unit contribution margin. Here is selected cost information.

Description	Turkeys	Ribs	Brisket
Monthly Production	960	575	1,695
Price per unit	$        7.51	$        8.48	$        8.99
Smoke House Hours	139	74	465
Direct Labor Hours	48	31	62
Direct Labor Hourly Rate	$      16.50	$      16.50	$      16.50
Material Cost	$ 2,189.00	$ 1,599.00	$ 1,661.00
Direct Labor Cost	$    792.00	$    512.00	$ 1,023.00
Total Pooled Overhead	$ 6,750.00	$ 6,750.00	$ 6,750.00

Which of product lines is the most profitable under either cost allocation basis?

	A.	Not enough information to compute an answer.
	B.	Turkeys
	C.	Brisket
	D.	Ribs

Answer 1