Divided by the number of units of the scarce resource

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divided by the number of units of the scarce resource required to produce one unit of the product. For example, if a product’s contribution margin per unit is \$5 and it requires two hours of direct labour to produce one unit, the contribution margin per direct labour hour is \$2.50. In a short-term product mix decision, products are produced in order of the highest contribution margin per unit of limited resource. EXERCISE 20.27 (15 minutes) Time and material pricing: manufacturer 1 Material component of time and material pricing formula: 0 2 . 1 Dept Repair in used materials of cost annual costs storage and handling material annual job on incurred cost material + job on incurred cost material 2 Material component of price, using formula developed in requirement 1: [\$8000 + (\$8000 0.04)] 1.20 = \$8320 1.20 = \$9984 New price to be quoted on yacht refurbishment: Total price of job = time charges + material charges = \$10 400* + \$9984 = \$20 384 * from Exhibit 20.5 EXERCISE 20.26 (25 minutes) Cost-plus pricing formulas: manufacturer Cost-plus pricing formula 1 Variable manufacturing cost \$200 \$400 = \$200 + (100% \$200) a Applied fixed manufacturing cost 70 2 Absorption manufacturing cost \$270 \$400= \$270 + (48.15% \$270) b Variable selling and administrative cost 30 Allocated fixed selling and administrative cost 50 3 Total cost \$350 \$400= \$350 + (14.29% \$350) c
Variable manufacturing cost \$200 Variable selling and administrative cost 30 4 Total variable cost \$230 \$400= \$230 + (73.91% \$230) d a (\$400 – \$200) ÷ \$200 = 100% b (\$400– \$270) ÷ \$270 = 48.15% (rounded) c (\$400– \$350) ÷ \$350 = 14.29% (rounded) d (\$400– \$230) ÷ \$230 = 73.91% (rounded)
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