Carter Inc. produces two products, A and B. Pertinent per-unit data follow:There is insufficient labor capacity in the plant to meet the combined demand for both products. Both products are produced through the same production departments. The fixed factory overhead rate is $10 per DLH. Assume that there are no avoidable fixed factory overhead costs.
Required:
1. Calculate the unit contribution margin for each of the two products.
2. Determine which product should be produced in priority, given the labor constraint, and explain why.

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The Answer of Carter Inc. produces two products, A and B. Pertinent per-unit data follow:There is insufficient labor capacity in the plant to meet the combined demand for both products. Both products are produced through the same production departments. The fixed factory overhead rate is $10 per DLH. Assume that there are no avoidable fixed factory overhead costs.
Required:
1. Calculate the unit contribution margin for each of the two products.
2. Determine which product should be produced in priority, given the labor constraint, and explain why.