Billings Inc. produces and sells three products. Unit data concerning each product is shown below. The company

Question:

Billings Inc. produces and sells three products. Unit data concerning each product is shown below.

The company has 2,000 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 $10.

Instructions
(a) Determine the number of direct labor hours per unit.
(b) Determine the contribution margin per direct labor hour.
(c) Determine which product should be produced and the total contribution margin for thatproduct.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...