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Insiteful Instruments produces two models of binoculars. Information for each model is as follows:
Insiteful Instruments produces two models of binoculars. Information for each model is as follows:
Model 100 Model 101
Sales $200 $215
Cost and expenses:
Direct material 51 38
Direct labor 33 30
Manufacturing OH ( applied at $18/machine hr):
Machine hr (1/3 fixed, 2/3 variable) 36 72
Variable selling expenses 30 15
Total cost and expenses 150 155
Profit per unit $50 $60
Machine hours required to produce one unit 2 4
Total manufacturing overhead amounts to $180,000 per month, one-third of which is fixed. The demand for either product is sufficient to keep the plant operating at full capacity (10,000 machine-hours per month). Assume that only one product is to be produced in the future.
Required:
a. Construct a schedule showing the contribution margin per machine-hour for each product.
b. Which of the two products should be discontinued?
