Question

Johnson Corporation produces and sells three products. Unit data concerning each product is shown below.

D E F

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Selling Price $196.90 $296.60 $246.40

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Direct Labor Costs $32.40 $92.40 $37.20

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Other Variable Costs $97.00 $81.00 $141.00

-The company has 1,900 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 $12

-Determine the number of direct labor hours per unit:

Product D hours per unit:______________

Product E hours per unit:______________

Product F hours per unit: ______________

-Determine the contribution margin per direct labor hour:

Product D Product E Product F

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Contribution margin per direct labor hour: $ ? $ ? $ ?

-Determine which product should be produced: D, E, or F

-Determine the total contribution margin for that product.

-Total contribution margin: _____________

Answer 1

a) Direct labor hour per unit

	D	E	F
Direct labor cost	32.40	92.40	37.20
Rate per hour	12	12	12
Labor hour per unit	2.7	7.7	3.1

b) Contribution margin per hour

	D	E	F
Contribution margin per unit	67.50	123.20	68.20
Labor hour per unit	2.7	7.7	3.1
Contribution margin per hour	25	16	22

c) Product D should be produced

d) Total Contribution margin = 1900*25 = $47500