1.Nevada Company manufactures and sells office chairs in two models: Executive and Deluxe. Product information is provided below.
Deluxe Executive
Unit selling price $150 $500
Unit variable costs 90 250
Unit contribution margin $ 60 $250
Machine hours required per unit 2 10
Nevada has 10,000 machine hours available each month for producing these two products. The demand for both products is such that Nevada can sell as many units of either product as it can produce. What is the maximum amount of contribution margin that the company can obtain from the available machine hours next month?
Calculate contribution margin per hour
Deluxe | Executive | |
Unit contribution margin | 60 | 250 |
Machine hour per unit | 2 | 10 |
Contribution margin per machine hour | 30 | 25 |
Rank | 1 | 2 |
1) Maximum contribution margin = 10000/2*60 = $300000
So answer is c) $300000
2) 3250 deluxe unit can be made in 3250*2 = 6500 hours
executive unit = (10000-6500)/10 = 350 Unit
Maximum contribution margin = (3250*60+350*250) = $282500
So answer is a) $282500
1.Nevada Company manufactures and sells office chairs in two models: Executive and Deluxe. Product information is...
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