Exhibit 7-6
Roseville,Inc.produces two types of gaming systems: Starter and Advanced.The gaming products are produced in separate departments and sent to the quality testing department before being packaged and shipped.A labor-hour bottleneck has been identified in the quality testing department due to the high skill requirements of the job.Roseville,Inc.has compiled the following data in order to optimize its use of labor hours for producing the most profitable product.
$$\begin{array} { l c c }
& \begin{array} { c }
\text { Quality Testing } \
\text { Labor-hours }
\end{array} & \begin{array} { c }
\text { Contribution } \
\text { Margin }
\end{array} \
\text { Starter } & 0.80 & \$ 200 \
\text { Advanced } & 0.50 & 150
\end{array}$$
-Refer to Exhibit 7-6.What is the contribution margin per quality testing labor-hour for the Advanced product?

Question

Exhibit 7-6
Roseville,Inc.produces two types of gaming systems: Starter and Advanced.The gaming products are produced in separate departments and sent to the quality testing department before being packaged and shipped.A labor-hour bottleneck has been identified in the quality testing department due to the high skill requirements of the job.Roseville,Inc.has compiled the following data in order to optimize its use of labor hours for producing the most profitable product.
 $$\begin{array} { l c c } 
& \begin{array} { c } 
\text { Quality Testing } \
\text { Labor-hours }
\end{array} & \begin{array} { c } 
\text { Contribution } \
\text { Margin }
\end{array} \
 \text { Starter } & 0.80 & \$ 200 \
\text { Advanced } & 0.50 & 150
\end{array}$$
-Refer to Exhibit 7-6.What is the contribution margin per quality testing labor-hour for the Advanced product?

Quizplus · Accepted Answer

To calculate the contribution margin per quality testing labor-hour for the Advanced product, we need to divide the contribution margin per unit of the Advanced product by the labor-hours required for the quality testing department.

Contribution margin per unit of Advanced product = Selling price per unit - Variable cost per unit
= $800 - $300
= $500

Labor-hours required for the quality testing department for Advanced product = 1 hour

Contribution margin per quality testing labor-hour for Advanced product = $500/1 hour = $500

Therefore, the correct answer is C) $300.

Exhibit 7-6 Roseville,Inc -Refer to Exhibit 7-6

Exhibit 7-6
Roseville,Inc -Refer to Exhibit 7-6