Higgins Inc. produces and sells three products. Unit data concerning each product is shown below.
- Product
- X Y Z
- Selling price $200 $300 $250
- Direct labor costs 30 75 45
- Other variable costs 110 90 121
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 $15.
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 that product.