Exhibit 6-6
Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce.
-Refer to Exhibit 6-6.Which of the following is the correct contribution margin per direct labor hour?

Question

Quizplus · Accepted Answer

To calculate the contribution margin per direct labor hour, we need to first calculate the contribution margin per unit:
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $40.00 - $15.00 = $25.00

We know that each chair requires 4 direct labor hours to produce. So, the contribution margin per direct labor hour can be calculated as:
Contribution margin per direct labor hour = Contribution margin per unit ÷ Direct labor hours per unit
Contribution margin per direct labor hour = $25.00 ÷ 4 = $6.25

Therefore, the correct answer is B) $6.25.

Exhibit 6-6 Sauer Company Sells Folding Chairs for $40.00 Per Unit.Variable Cost