Lewis Company has only 25,000 hours of machine time each month to manufacture its two products.Product X has a contribution margin of $50,and Product Y has a contribution margin of $64.Product X requires 5 hours of machine time,and Product Y requires 8 hours of machine time.If Lewis Company wants to dedicate 80 percent of its machine time to the product that will provide the most income,the company will have a total contribution margin of
A)$250,000.
B)$240,000.
C)$210,000.
D)$200,000.

Question

Quizplus · Accepted Answer

First, we need to calculate how many hours of machine time can be dedicated to each product:

Product X: 25,000 hours/month x 0.80 = 20,000 hours/month
Product Y: 25,000 hours/month x 0.20 = 5,000 hours/month

Next, we calculate the contribution margin earned by producing the maximum amount of each product:

Product X: 20,000 hours/month ÷ 5 hours/unit x $50/unit = $200,000/month
Product Y: 5,000 hours/month ÷ 8 hours/unit x $64/unit = $40,000/month

Therefore, the total contribution margin earned by producing the maximum amount of each product is $240,000/month ($200,000/month + $40,000/month). Therefore, the best choice is B.

Lewis Company Has Only 25,000 Hours of Machine Time Each