Custom Furniture manufactures a small table and a large table.The small table sells for $1000,has variable costs of $560 per table and takes ten direct labour hours to manufacture.The large table sells for $1500,has variable costs of $960 and takes eight direct labour hours to manufacture.Calculate the contribution margin per direct labour hour for the large table.

Question

Quizplus · Accepted Answer

The contribution margin for the small table can be calculated as follows:

Contribution margin = selling price - variable costs 
Contribution margin = $1000 - $560 
Contribution margin = $440

Contribution margin per direct labor hour for the small table = ($440/10) = $44 per direct labor hour

Similarly, the contribution margin for the large table can be calculated as follows:

Contribution margin = selling price - variable costs 
Contribution margin = $1500 - $960 
Contribution margin = $540

Contribution margin per direct labor hour for the large table = ($540/8) = $68 per direct labor hour

Therefore, the correct answer is option C.

Custom Furniture Manufactures a Small Table and a Large Table