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Duo Company manufactures two products, Uno and Dos. Contribution margin data follow.
Uno Dos
Unit sales $13.00 $31.00
Less variable cost:
Direct material $ 7.0 $ 5.00
Direct labor 1.00 6.00
Variable overhead 1.25 7.50
Variable selling and administrative cost .75 .50
Total variable cost $10.00 $19.00
Unit contribution margin $ 3.00 $12.00
Duo company's production process uses highly skilled labor, which is in short supply. The same employ- ees work on both products and earn the same wage rate.
Required:
Problem 1: Which of Duo Company's products is more profitable? Explain.
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