Exhibit 22-5 Imperial Company manufactures two types of fruit drinks, Tropical and Hawaiian. The company can sell as many bottles of each product as it can produce, but production is limited by the availability of direct labor hours. The revenues, costs, and labor hours for the two products are as follows:
Refer to Exhibit 22-5. What is the contribution margin per 100 bottles of Hawaiian?

Question

Exhibit 22-5 Imperial Company manufactures two types of fruit drinks, Tropical and Hawaiian. The company can sell as many bottles of each product as it can produce, but production is limited by the availability of direct labor hours. The revenues, costs, and labor hours for the two products are as follows:
 Refer to Exhibit 22-5. What is the contribution margin per 100 bottles of Hawaiian?

Quizplus · Accepted Answer

Contribution margin per 100 bottles of Hawaiian = (Selling price per bottle - Variable cost per bottle) x 100
= ($15 - $9) x 100
= $600

Therefore, the contribution margin per 100 bottles of Hawaiian is $600.

The best choice(s) cannot be determined based on this information alone, as we do not know the production limitation in terms of direct labor hours for each product. However, the company should produce the product that generates the highest contribution margin per unit of limited resource available (in this case, direct labor hours).

Exhibit 22-5 Imperial Company Manufactures Two Types of Fruit Drinks