Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour.
What is the contribution per machine hour for Wales?

Question

Quizplus · Accepted Answer

The contribution per machine hour for Wales is calculated by subtracting the variable cost from the selling price to get the contribution margin per unit, and then dividing by the hours required per unit. For Wales: ($32 - $15) / 1 hour = $17 per machine hour.