FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.

                                      Product L    Product W

Direct materials                      $   44      $    36

Machining labor ($12/hour)                 18           15

Assembly labor ($10Thour)                  30           10

Variable overhead ($8,hour)                36           18

Fixed overhead (4/hour)                    18

Total Manufacturing Cost                   146          88

Estimated selling price per unit      $  170     $    100

Actual research and development costs $240,000     $175,000

Estima.d advertising costs            $500,000     $300,000

Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are  not allocated to individual products.
 
The difference between the $100 estimated selling price for Mountainburg's Product W and its total manufacturing cost of $88 represents
   
Operating profit per unit.
   
Contribution margin per unit.
   
Variable cost per unit.
   
Gross margin per unit.
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