Figure 13-4. Connolly Company produces two types of lamps,classic and fancy,with unit contribution margins of $13 and $21,respectively.Each lamp must spend time on a special machine.The firm owns four machines that together provide 18,000 hours of machine time per year.The classic lamp requires 0.20 hours of machine time,the fancy lamp requires 0.50 hours of machine time.
Refer to Figure 13-4.What is the contribution margin per hour of machine time for a fancy lamp?
A)$21
B)$42
C)$13
D)$8
E)$6

Question

Quizplus · Accepted Answer

To find the contribution margin per hour of machine time for a fancy lamp, divide the unit contribution margin by the required machine time:

$21 / 0.50 hours = $42

Therefore, the contribution margin per hour of machine time for a fancy lamp is $42.

The best choice(s) would depend on the goal of the company. If the goal is to maximize profit, the company should produce the lamps that generate the highest contribution margin per hour of machine time. In this case, that would be the fancy lamps with a contribution margin per hour of $42. If the goal is to optimize machine usage, the company should produce a mix of both lamps that maximize the total contribution margin while staying within the 18,000 hours of available machine time. This would require further analysis and calculations.