Question

Dalton Inc. produces and sells three products. Unit data concerning each product is shown below. Selling price Direct labor costs Other variable costs Product DE F $207.0 $324.4 $247.4 36.4 107.8 43.4 103 78 142 The company has 2,500 hours of labor available to build inventory in anticipation of the company's peak season. Management is trying to decide which product should be produced. The direct labor hourly rate is $14. Determine the number of direct labor hours per unit. (Round answers to 1 decimal place, e.g. 1.5.) Direct labor Product D hours per unit Product E hours per unit Product F hours per unit

Answer 1

1) Number of direct labor hour per unit

	Direct labor hour per unit
Product D	36.4/14 = 2.6
Product E	107.8/14 = 7.7
Product F	43.4/14 = 3.1

2) Contribution margin per hour

	Product D	Product E	Product F
Contribution margin per unit	67.60	138.60	62
Labor hour per unit	2.6	7.7	3.1
Contribution margin per hour	26	18	20

3) Product D should be manufactured

4) Total Contribution margin = 2500*26 = 65000