Custom Furniture manufactures a small table and a large table. The small table sells for $900, has variable costs of $560 per table, and takes ten direct labor hours to manufacture. The large table sells for $1,500, has variable costs of $980, and takes eight direct labor hours to manufacture. Calculate the contribution margin per direct labor hour for the large table.

Question

Quizplus · Accepted Answer

Contribution margin per direct labor hour for the small table is:

Contribution margin per unit = Selling price - Variable cost per unit
Contribution margin per unit = $900 - $560
Contribution margin per unit = $340

Contribution margin per direct labor hour = Contribution margin per unit / Direct labor hours per unit
Contribution margin per direct labor hour = $340 / 10
Contribution margin per direct labor hour = $34

Contribution margin per direct labor hour for the large table is:

Contribution margin per unit = Selling price - Variable cost per unit
Contribution margin per unit = $1,500 - $980
Contribution margin per unit = $520

Contribution margin per direct labor hour = Contribution margin per unit / Direct labor hours per unit
Contribution margin per direct labor hour = $520 / 8
Contribution margin per direct labor hour = $65

Custom Furniture Manufactures a Small Table and a Large Table