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Dropping a product line. Timepiece Products, a clock manufacturer, operates at capacity. Constrained by machine time, the company decides to drop the most unprofitable of its three product lines. The accounting department came up with the following data from last year's operations:
Manual
Electric
Quartz
Machine Time per Unit
Selling Price per Unit
0.4 Hour
$20
2.5 Hours
$30
5.0 Hours
$50
Less Variable Costs per Unit
10
14
28
Contribution Margin
$10
$16
$22
Which line should Timepiece Products drop? (Hint: Compute the contribution per machine hour because machine time is the constraint.)
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Compute product costs per unit and period costs for the period - Components of Full Costs
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