Denver Cabinets Company (DCC) produces and sells specialty wooden cabinets. Production is machine-intensive. DCC’s variable costs are direct materials, variable machining costs and sales commissions. Robert Denver, the owner, is planning production for 2011. Salespeople are paid a 6% commission on each Colonial or Modern models sold and an 8% commission on each Distressed model sold. Fixed costs (administrative/selling and production) total $8,750,000. Annual capacity is 50,000 machine hours which is limited by the availability of machines. Variable machining costs are $200 per hour.

Type of Wooden Cabinet	Annual Demand in units	Selling Price per Unit	Direct material costs per unit	Variable machining costs per unit
Colonial	4,000	$3,000	$750	$600
Modern	5,000	$2,100	$500	$500
Distressed	30,000	$800	$100	$300

a. Calculate the machine hours per unit required to satisfy the estimated demand for each type of cabinet.

b. Calculate the contribution margin per unit earned from each type of cabinet?

Answer rating: 100% (QA)

Statementshowing Computations Paticulars Colonial Modern Distressed Total a Variable ... View the full answer