Howie Jones used the following information to calculate the profit coefficients for Aqua-Spas and Hydro-Luxes: pumps cost $225 each, labor
Howies accountant reviewed these calculations and thinks Howie made a mistake. For accounting purposes, factory overhead is assigned to products at a rate of $16 per labor hour. Howies accountant argues that because Aqua-Spas require nine labor hours, the profit margin on this product should be $144 less. Similarly, because Hydro-Luxes require six labor hours, the profit margin on this product should be $96 less. Who is right andwhy?
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