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Compute degree of operating leverage

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Question - Helena Company manufactures and sells two products. Relevant per unit data concerning each product follow.

 

Product

 

Basic

Deluxe

Selling Price

$40

$52

Variable costs

$22

$24

Machine hours

0.5

0.8

(a) Compute the contribution margin per machine hour for each product.

(b) If 1,000 additional machine hours are available, which product should Helena manufacture?

(c) Make an analysis showing the total contribution margin if the additional hours are:

(1) Divided equally between the products.

(2) Allocated entirely to the product identified in part (b).

Compute degree of operating leverage and evaluate impact of alternative cost structures on net income.

Reference no: EM132173986

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