Cover- up manufactures two products, Hats and Caps. The following information is available: $$\begin{array} { l l l }
& \text { Hats } & \underline { \text { Caps } } \
\text { Selling price p er unit } & \$ 21 & \$ 13 \
\text { Variable cost per unit } & \$ 12 & \$ 9 \
\text { Labor hour s required } & 3 & 1 \
\text { Tot al fixed costs } & & \$ 52,000
\end{array}$$ Labor hour capacity for the year is 15,000 hours. Required:
a. Which product has the higher contribution margin per unit?
b. Which product has the higher contribution margin per hour?
c. Assume that Cover- up can produce only one product. What will net income be?

Question

Cover- up manufactures two products, Hats and Caps. The following information is available: $$\begin{array} { l l l } 
& \text { Hats } & \underline { \text { Caps } } \
\text { Selling price p er unit } & \$ 21 & \$ 13 \
\text { Variable cost per unit } & \$ 12 & \$ 9 \
\text { Labor hour s required } & 3 & 1 \
\text { Tot al fixed costs } & & \$ 52,000
\end{array}$$ Labor hour capacity for the year is 15,000 hours. Required:
a. Which product has the higher contribution margin per unit?
b. Which product has the higher contribution margin per hour?
c. Assume that Cover- up can produce only one product. What will net income be?

Quizplus · Accepted Answer

The Answer of Cover- up manufactures two products, Hats and Caps. The following information is available: $$\begin{array} { l l l } 
& \text { Hats } & \underline { \text { Caps } } \
\text { Selling price p er unit } & \$ 21 & \$ 13 \
\text { Variable cost per unit } & \$ 12 & \$ 9 \
\text { Labor hour s required } & 3 & 1 \
\text { Tot al fixed costs } & & \$ 52,000
\end{array}$$ Labor hour capacity for the year is 15,000 hours. Required:
a. Which product has the higher contribution margin per unit?
b. Which product has the higher contribution margin per hour?
c. Assume that Cover- up can produce only one product. What will net income be?

Cover- Up Manufactures Two Products, Hats and Caps Labor Hour Capacity for the Year Is 15,000 Hours