Optical Instruments produces two models of binoculars. Information for each model is as follows: Mod
Optical Instruments produces two models of binoculars. Information for each model is as follows:
Model100Model 101
Sales prices per unit……………………………..$200$135
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Order Paper NowCosts and expenses per unit:
Direct Materials………………………….$51$38
Direct Labor………………………………3330
Manufacturing overhead (applied
At the rate $18 per machine-hr,
2/3 variable)……………………………..3618
Variable selling expenses…………….3015
Total costs and expenses perunit…150101
Profit per unit……………………………………..$50$34
Machine-hours required to produce one unit…21
Total manufacturing overhead amounts to $180,000 per month, one-third of which is fixed. The demand for either product is sufficient to keep the plant operating atfull capacity. (10,000 machine-hours per month) Assume that only one product is to be produced in the future.
Instructions:
a.Prepare a schedule showing the contribution margin per machine-hour for each product.
b.Explain your recommendation as to which of the two products should be discontinued.
