The Righteous Brothers run a smokehouse where they process, smoke and sell turkeys, pork ribs and beef
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Question:
The Righteous Brothers run a smokehouse where they process, smoke and sell turkeys, pork ribs and beef brisket. They have been allocating overhead to the product lines using direct labor hours. A consultant has recommended using smoke house hours as a better measure of unit contribution margin. Here is selected cost information.
| Description | Turkeys | Ribs | Brisket |
| Monthly Production | 960 | 575 | 1,695 |
| Price per unit | $ 7.51 | $ 8.48 | $ 8.99 |
| Smoke House Hours | 139 | 74 | 465 |
| Direct Labor Hours | 48 | 31 | 62 |
| Direct Labor Hourly Rate | $ 16.50 | $ 16.50 | $ 16.50 |
| Material Cost | $ 2,189.00 | $ 1,599.00 | $ 1,661.00 |
| Direct Labor Cost | $ 792.00 | $ 512.00 | $ 1,023.00 |
| Total Pooled Overhead | $ 6,750.00 | $ 6,750.00 | $ 6,750.00 |
Which of product lines is the most profitable under either cost allocation basis?
| A. | Not enough information to compute an answer. | |
| B. | Turkeys | |
| C. | Brisket | |
| D. | Ribs |
Expert Answer:
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