Question

Duo Company manufactures two products, Uno and Dos. Contribution margin data follow. Duo company’s production process uses highly skilled labor, which is in short supply. The same employees work on both products and earn the same wage rate.

Required: Which of Duo Company’s products is more profitable? Explain.

Uno
Dos
Unit sales
$13.00
$31.00
Less varlable cost:
Direct material
$ 7.00
$ 5.00
Direct labor
1.00
6.00
Variable overhead
1.25
7.50
Variable selling and administrative cost
.75
.50
Total variable cost
$10.00
$19.00
Unit contribution margin
$ 3.00
$12.00
Expand
Transcribed Image Text

Uno Dos Unit sales $13.00 $31.00 Less varlable cost: Direct material $ 7.00 $ 5.00 Direct labor 1.00 6.00 Variable overhead 1.25 7.50 Variable selling and administrative cost .75 .50 Total variable cost $10.00 $19.00 Unit contribution margin $ 3.00 $12.00

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Comparative Analysis

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