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Howie Jones used the following information to calculate the profit coefficients for Aqua-Spas and Hydro-Luxes:...

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Accounting

Howie Jones used the following information to calculate the profit coefficients for Aqua-Spas and Hydro-Luxes: pumps cost $225 each, labor costs $12 per hour, tubing costs $2 per foot. In addition to pumps, labor, and tubing, the production of Aqua-Spas and Hydro-Luxes consumes, respectively, $243 and $246 per unit in Howie Jones used the following information to calculate the profit coefficients for Aqua-Spas and Hydro-Luxes: pumps cost $225 each, labor costs $12 per hour, tubing costs $2 per foot. In addition to pumps, labor, and tubing, the production of Aqua-Spas and Hydro-Luxes consumes, respectively, $243 and $246 per unit in

Aqua-Spas Hydro-Luxes

Selling Price $950 $875

Pump Cost -$225 2 -$225

Labor Cost -$108 -$72

Tubing Cost -$24 -$32

Variable Costs -$243 - $246

Marginal Proft $350 $300

Howie's accountant reviewed these calculations and thinks Howie made a mistake. For accounting purposes, factory overhead is assigned to products at a rate of $16 per labor hour. Howie's accountant argues that because Aqua-Spas require 9 labor hours, the profit margin on this product should be $144 less. Similarly, because Hydro-Luxes require 6 labor hours, the profit margin on this product should be $96 less. Who is right and why

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