Question

if there are no constraints on sales of either of the products and the company could choose any proportions of product mix that they wanted, the maximum contribution margin that

Modern Living Furniture manufactures a small table and a large table. The small table sells for $900, has variable costs of $550 per table, and takes 10 direct labor hours to manufacture. The large table sells for $1500, has variable costs of $980, and takes eight direct labor hours to manufacture. The company has a maximum of 5000 direct labor hours per month when operating at full capacity. If there are no constraints on sales of either of the products and the company could choose any proportions of product mix that they wanted, the maximum contribution margin that the company could earn will be A) $937,500 B) $612,500 C) $1,550,000 D) $325,000 B Se

Answer 1

The Correct option is 4th i e., $325,000 Explanation- firstly we calaelate the contribution Margin per direct labor hrs Large Table Small Table $1500 $900 ($980) ($550) Particulars Selling Price per Table Less:- variable cost per Table Contribution Margin per Table (4) Direct Labor howrs Contribution Mäengin per Direct Labor hours $520 $350 ohrs lohrs $65 $35 In Next Step we calculate the Maximum Contribution Margar Maximum Contolbetion Margin Maximum Maximum Contolbution chors Maorgin ber Labor hry Sooohre x $65 X こ $325,000 Note) Large Table has the Maximum Contoibution Margia per labor hours because the contribution Margin berlabor howys of Large Table is greater than the contribution Margin per labor how's of Small Table.