Mountainburg Industries has developed two new products but has only enough plant capacity to introduce...
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Accounting
Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.
Product L
Product W
Direct materials
$
44
$
36
Machining labor ($12/hour)
18
15
Assembly labor ($10/hour)
30
10
Variable overhead ($8/hour)
36
18
Fixed overhead (4/hour)
18
9
Total Manufacturing Cost
$
146
$
88
Estimated selling price per unit
$
170
$
100
Actual research and development costs
$
240,000
$
175,000
Estimated advertising costs
$
500,000
$
350,000
Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products. The difference between the $100 estimated selling price for Mountainburg's Product W and its total manufacturing cost of $88 represents
Multiple Choice
Contribution margin per unit.
Gross margin per unit.
Variable cost per unit.
Operating profit per unit.
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