Your company can produce and sell only one of the following two products; Machine Hours Required...
Your company can produce and sell only one of the following two products;
|
Machine Hours Required |
Contribution Margin |
|
|
Product 1 |
6 |
SR 60 |
|
Product 2 |
4 |
SR 50 |
If the company has machine capacity of 1,500 hours, the total contribution margin of the product selected should maximize net income produced to SR 16,000.
|
Opinion |
|
|
Justification |
|
Homework Answers
Contribution margin per hour
Product 1 = 60/6 = 10 per hour
Product 2 = 50/4 = 12.5 per hour
Opinion:
As per the results product 2 should be produced as its contribution margin per hour is higher than product 1.
Justification:
The total contribution margin of product 2 is 18,750 (1500*12.5) which exceeds limit of 16,000 as compared to product 1 total contribution margin 15,000 (1500*10) which is less than the limit of 16,000.
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$
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Variable costs per unit
30
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Contribution margin per unit
$
60
$
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hours
Maximum unit sales per month
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units
200
units
The company presently operates the machine for a single
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available.
Product G
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Selling price per unit
$
90
$
120
Variable costs per unit
30
72
Contribution margin per unit
$
60
$
48
Machine hours to produce 1 unit
0.4
hours
1.0
hours
Maximum unit sales per month
600
units
200
units
The company presently operates the machine for a single
eight-hour...
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