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A product with a very low margin may be desirable in a situation that it is more efficient in using the constrained resource, welding hours in this case.
2. Objective: To compute Contribution Margin per unit.
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 drums Manufactured XSX drums Manufactured Mountain Bike Frames
Selling Price $ 154.00 $ 154...
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