Clay Corporation manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp. The following per unit data are available: $$\begin{array} { | l | r | r | }
\hline & \text { Bedford Lamp } & \text { Lowell Lamp } \
\hline \text { Sale price } & \$ 25 & \$ 35 \
\hline \text { Variable costs } & \$ 17 & \$ 23 \
\hline \text { Machine hours required for 1 lamp } & 2 & 4 \
\hline
\end{array}$$ Total fixed costs are $30,000, and Clay can sell a maximum of 10,000 units of each style of lamp annually. Machine hour capacity is 25,000 hours per year. What is the contribution margin per machine hour for the Bedford lamp?

Question

Clay Corporation manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp. The following per unit data are available: $$\begin{array} { | l | r | r | } 
\hline & \text { Bedford Lamp } & \text { Lowell Lamp } \
\hline \text { Sale price } & \$ 25 & \$ 35 \
\hline \text { Variable costs } & \$ 17 & \$ 23 \
\hline \text { Machine hours required for 1 lamp } & 2 & 4 \
\hline
\end{array}$$ Total fixed costs are $30,000, and Clay can sell a maximum of 10,000 units of each style of lamp annually. Machine hour capacity is 25,000 hours per year. What is the contribution margin per machine hour for the Bedford lamp?

Quizplus · Accepted Answer

Contribution margin per machine hour = (Selling price per unit - Variable cost per unit) / Machine hours required per unit= ($25 - $17) / 2= $8 / 2= $4 per machine hour

Clay Corporation Manufactures Two Styles of Lamps-A Bedford Lamp and a Lowell