Question

Smart Company is trying to decide which product to manufacture. Expected direct materials costs are $6.00 per unit for each product. The expected direct labor costs are $3.00 per unit for one product and $5.00 per unit for another product. In choosing between the two products, the direct materials costs are ________ and the direct labor costs are ________.

Answer 1

The labor cost is different between both products. The decision whether which product to produce and sell, the product with the lower direct labor cost is the more convenient. Always considering only the costs and not the selling price.

Step-by-step explanation:

Giving the following information:

Expected direct materials costs are $6.00 per unit for each product. The expected direct labor costs are $3.00 per unit for one product and $5.00 per unit for another product.

The direct material is equal in both products, therefore, it is irrelevant to take them into account for the decision making process.

The labor cost is different between both products. The decision whether which product to produce and sell, the product with the lower direct labor cost is the more convenient. Always considering only the costs and not the selling price.