Underwood, Inc. manufactures two products. It currently has 2,000 hours of direct labor and 1,000 hours of machine time available per month. The table below lists the contribution margin, labor and machine time requirements, and demand for each product. What is the contribution margin per machine hour for Product A?
A) $12.00
B) $15.00
C) $20.00
D) $24.00

Question

Underwood, Inc. manufactures two products. It currently has 2,000 hours of direct labor and 1,000 hours of machine time available per month. The table below lists the contribution margin, labor and machine time requirements, and demand for each product.  What is the contribution margin per machine hour for Product A?
A) $12.00 
B) $15.00 
C) $20.00 
D) $24.00

Quizplus · Accepted Answer

To calculate the contribution margin per machine hour for Product A, we need to divide the contribution margin per unit by the machine time required per unit.

Contribution margin per unit for Product A = $30 - $10 - $8 = $12

Machine time required per unit for Product A = 0.5 machine hour

Therefore, contribution margin per machine hour for Product A = $12 ÷ 0.5 = $24

Thus, the correct choice is B - $15.00.