Determine the weekly contribution margin when all labor hours are alloted to the product with the highest:

a. unit selling price
b. unit contribution margin
c. contribution per labor-hour

I am given the following: 600 labor hours per week

Small Medium Large

Selling Price $8 $12 $15
Variable Costs 5 6 10
Labor-Hours 0.3 0.5 1.0
per shirt

You need to back up because the problem isn't asking you to figure out unit selling price. It is asking you to figure out contribution margin when all labor hours are allotted to the product with the highest... and then you have 3 "highest" things to do.

The first one is unit selling price. That means the labor hours get allotted in (a) to the one with the highest selling price. Which is which one?

Although seems to me there's missing info here. Not to mention that it doesn't make any sense. Why would you allot all 600 labor hours to just one of the three products? And how can you figure out contribution margin when there's no labor hour rate? And how can you allot it to the highest contribution margin if you need the labor to get the contribution margin? Makes no sense.

(BTW, the problem already gave you unit selling price. What do you think the $8, 12 & 15 are?)

I'm just reading what my paper says and I'm sure it works I just can't figure this out.

Quote:

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Originally Posted by morgaine300

You need to back up because the problem isn't asking you to figure out unit selling price. It is asking you to figure out contribution margin when all labor hours are allotted to the product with the highest.... and then you have 3 "highest" things to do.

The first one is unit selling price. That means the labor hours get allotted in (a) to the one with the highest selling price. Which is which one?

Although seems to me there's missing info here. Not to mention that it doesn't make any sense. Why would you allot all 600 labor hours to just one of the three products? And how can you figure out contribution margin when there's no labor hour rate? And how can you allot it to the highest contribution margin if you need the labor to get the contribution margin? Makes no sense.

(BTW, the problem already gave you unit selling price. What do you think the $8, 12 & 15 are?)

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It's says one assembly line that has a limit of 600 labor hours per week.

The first one is unit selling price. That means the labor hours get allotted in (a) to the one with the highest selling price. Which is which one?

Although seems to me there's missing info here. Not to mention that it doesn't make any sense. Why would you allot all 600 labor hours to just one of the three products? And how can you figure out contribution margin when there's no labor hour rate? And how can you allot it to the highest contribution margin if you need the labor to get the contribution margin? Makes no sense.

(BTW, the problem already gave you unit selling price. What do you think the $8, 12 & 15 are?)[/QUOTE]

It's says one assembly line that has a limit of 600 labor hours per week! Sorry this is my first time using this site.

I'm sorry, but there simply isn't enough information to solve the problem, just like I said the first time. 99% of the time when I say there's missing information, even if someone tells me "everything" is there, there really is missing information.

Contribution margin (what they're asking for) is sales less variable costs. Labor is a variable cost. How can you figure that out when there isn't any information about what labor costs? Knowing the hours doesn't give us that information. There's other stuff I can do with it, but I can't figure out a contribution margin that includes labor when no labor costs are given. Plain and simple.

There definitely has to be more to this problem. If you want help with it, you are going to have to post the entire thing, word for word. (I have to wonder if you are actually allocating overhead based on labor hours. It doesn't say that, and it still gives no costs. But at least that would make more sense than how the problem is stated.)

Yeah so I was right. There is enough information. I figured out A. Large shirts have the highest selling price at $15. The controbution margin is 3,000.
600x15=9,000
600x10=6,000
9,000-6,000=3,000 so I do have the right information.
Now just got to figure out b and c.

The way you have computed that, you're using the 600 as the number of units (shirts) sold. i.e. $15 per shirt times 600 shirts, and then $10 variable times 600.

Except that you have stated that 600 is the labor hours to be allocated. That is not the same thing as the number of shirts sold.