Question

Mars Company manufactures and sells three products. Relevant per unit data concerning each product are given below: Product A B C Selling price $9 $13 $16 Variable costs and expenses $6 $9 $13 Machine hours to produce 2 1 2 Compute the contribution margin per unit of limited resource (machine hours) for each product. (Round contribution margin per unit to 2 decimal places, e.g. 1.25.) Product A Product B Product C Contribution margin per unit of limited resource $ e Textbook and Media Assuming 3,000 additional machine hours are available, which product should be manufactured?

Answer 1

1) Contribution margin per limited resource

	Product A	Product B	Product
Contribution margin per unit	3	4	3
Hour per unit	2	1	2
Contribution margin per hour	1.5	4	1.5

2) Product B should be manufactured

3) Dividend equally among the products = (1000*1.5+1000*4+1000*1.5) = 7000

Allocated entirely to the product = 3000*4 = 12000