Case Study: Storage Systems, Inc.
The fact that "All the company's employees direct and indirect are paid for full 40-hour workweeks" strongly indicates that the direct labor is an entirely fixed cost (i.e., it has no variable component, since the employees get paid for 40 hors per week no matter how much they work).
Purchased XSX drumsManufactured XSX drumsManufactured Mountain Bike Frames Selling Price $ 154.00 $ 154.00 $ 65.00
Variable Cost per Unit:
Materials $ 120.00 $ 44.50 $ 17.50
Manufacturing Overhead $ - $ 1.05 $ 0.60 Selling and Administrative Cost $ 0.85 $ 120.85 $ 0.85 $ 46.40 $ 0.40 $ 18.50 Contribution Margin per unit $ 33.15 $ 107.60 $ 46.50
Welding hours per unit 0.80 0.20
Contribution margin per unit per welding hour $ 134.50 $ 232.50
3.
Quantity
(1)Contribution Margin/Unit (2)Welding Time per Unit
(3)Total Welding Time
(4) = (1)×(3)Welding Time Available (5)Total Contribution Margin (6) = (2)×(1)...
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