Elegance Bath Products, Inc. (EBP) makes a variety of ceramic sinks and tubs. EBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $150 each and have variable costs of $80. The tubs sell for $600 and have variable cost of $450. The glass and ceramic sinks and tubs require the use of specialized moulding equipment. The specialized moulding equipment has 4,050 hours of capacity per year. A sink uses an average of two hours of specialized moulding equipment time; a tub uses an average of five hours of specialized moulding equipment time.
-Refer to the Figure.What is the contribution margin per hour of specialized moulding equipment time for sinks?
A)$33.33
B)$35.00
C)$68.33
D)$70.00

Question

Quizplus · Accepted Answer

The contribution margin per unit for sinks is calculated as the selling price minus the variable cost, which is $150 - $80 = $70. Since each sink uses an average of two hours of specialized moulding equipment time, the contribution margin per hour of specialized moulding equipment time for sinks is $70 / 2 = $35.00.