Product-Profitability Analysis; Scarce Resources Creighton Corporation produces a varietyof consumer electronic products. Unit selling prices and costs for three models of one of its productlines are as follows:[LO 11-7]No Frills Standard Options SuperSelling price $40 $70 $86Direct materials 10 14 16Direct labor (@ $20/hour) 10 20 30Variable overhead 3 6 9Fixed overhead 3 6 6Variable overhead is charged to products on the basis of direct labor dollars; fixed overhead isallocated to products on the basis of machine hours.Required2. Calculate for each product both the gross profit per unit and the contribution margin per unit. (Roundanswers to 2 decimal places, e.g., $15.459 = $15.46.) Are either of these profitability measures usefulfor planning the optimum short-term product mix? Explain.
Product-Profitability Analysis; Scarce Resources Creighton Corporation produces a variety
of consumer electronic products. Unit selling prices and costs for three models of one of its product
lines are as follows:
[LO 11-7]
No Frills Standard Options Super
Selling price $40 $70 $86
Direct materials 10 14 16
Direct labor (@ $20/hour) 10 20 30
Variable overhead 3 6 9
Fixed overhead 3 6 6
Variable overhead is charged to products on the basis of direct labor dollars; fixed overhead is
allocated to products on the basis of machine hours.
Required
2. Calculate for each product both the gross profit per unit and the contribution margin per unit. (Round
answers to 2 decimal places, e.g., $15.459 = $15.46.) Are either of these profitability measures useful
for planning the optimum short-term product mix? Explain.
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