Question

Mars Company manufactures and sell three products. Relevant per unit data concerning each product are given below: Product Selling price Variable costs and expenses Machine hours to produce $15 Compute the contribution margin per unit of limited resource machine hours) for each product. (Round contribution margin per unit to 2 decimal places, ... 1.25.) Product A Product B Product C Contribution margin per unit of limited resource LINK TO TEXT Assuming 3,000 additional machine hours are available, which product should be maractured

Answer 1

• 	A	B	C
  Contrib. Margin per unit of limited resource [Note 1]	$ 1.5	$ 2	$ 1.5

• Product to be manufactured if 3000 "additional": Product B should be manufactured because it gives higher contribution per machine hour.[Note 1]

• (1) and (2) are answred based on the assumption that only 3000 machines hours are available, and every unit produced can be sold (but if there is any info in the question about total hours available other than this "additional" 3000 hours, and/or if there is any info on units demanded, make mention of the same, because the answer would be different in that case - comment and I will rework the below parts accordingly:
  (1) $ 5000 [Note 2]
  (2) $ 6000 [Note 3]

Notes:
Note 1: Contribution per machine hour:

	A	B	C
(a) Sales	9	15	18
(b) Variable Cost	6	13	15
(c) Contribution [(a) - (b)]	3	2	3
(d) Machine hours required	2	1	2
(e) Contribution per machine hour [(c) / (d)]	1.5	2	1.5

Note 2: Contribution if 3000 hours are equally alloted:
A: 1000 hours x $1.5 per hour = $ 1500
B: 1000 hours x $2.0 per hour = $ 2000
C: 1000 hours x $1.5 per hour = $ 1500
Total: $ 5,000 [being 1500+2000+1500]

Note 3: Contribution if 3000 hours are to produce B: $2 per hour (Note 1) x 3000 hours = $6,000.

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