Calculate the total contribution margin

Reference no: EM132650261

Question - Direct labour cost is $16 per hour. Variable manufacturing support costs are applied on the basis of direct labour hours. This year's variable manufacturing support costs are budgeted at $2,240,000, and direct labour hours are estimated at 448,000. Other manufacturing support is applied at $12 per machine hour. CEB applies a materials handling charge (in other words, materials support costs) of 12% of direct materials cost; this materials handling charge is not included in variable manufacturing support costs.

Ed Welch, CEB's management accountant, believes that before the management group proceeds with the discussion about allocating sales and promotional dollars to individual products, it may be worthwhile to look at these products on the basis of the activities involved in their production. He noticed that the company has been recently selling more of the high-end PC boards than their competitors, yet the profits were still falling.

	TV	PC
Direct materials	15	47
Direct labour	10	37
Machine hour	1	19

Direct labour cost is $16 per hour. Variable manufacturing support costs are applied on the basis of direct labour hours. This year's variable manufacturing support costs are budgeted at $2,240,000, and direct labour hours are estimated at 448,000. Other manufacturing support is applied at $12 per machine hour. CEB applies a materials handling charge (in other words, materials support costs) of 12% of direct materials cost; this materials handling charge is not included in variable manufacturing support costs.

Required -

1. On the basis of standard costs, calculate the total contribution margin and a contribution margin per product expected in 2020 for CEB Corporation's products: the TV board and the PC board.

2. On the basis of activity-based costing, calculate the total contribution margin and the contribution margin per unit expected for 2020 for CEB Corporation's two products.

Reference no: EM132650261

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