Question

Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows. Product Standard Deluxe Economy $38 Selling price Variable costs and expenses Machine hours required $63 $25 0.8 $125 $58 $20 0.5 1.6 Calculate contribution margin per unit. Product Standard Economy Deluxe Contribution margin per unit Ignoring the machine time constraint, which single product should Tanek Industries produce? What is the contribution margin per unit of limited resource for each product? (Round answers to 2 decimal places, e.g.10.50.) Economy Standard Deluxe Contribution margin per limited resource

Answer 1

Requirement 1

	Economy	Standard	Deluxe
Contribution margin per unit	$    18.00	$    38.00	$    67.00

Requirement 2

Company should produce ....------Standard

Requirement 3

	Economy	Standard	Deluxe
Contribution margin per limited resources	$    36.00	$    47.50	$    41.88

Requirement 4

The additional machine hours should be used to produce --------Standard.

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Working

Statement of ranking indicating which product to produced first, second and third
	Product
	Economy	Standard	Deluxe
Sales price per unit	$    38.00	$    63.00	$ 125.00
Variable cost per unit	$    20.00	$    25.00	$    58.00
Contribution margin per unit	$    18.00	$    38.00	$    67.00
Machine hours per unit	0.50	0.80	1.60
Contribution margin per machine hour	$    36.00	$    47.50	$    41.88
Produce	Third	First	Second

Due to highest contribution margin per limited resource standard is most profitable.