Foster Corporation produces two products-P and Q. P sells for $4.00 per unit; Q sells for $5.25 per unit. Variable costs for P and Q are respectively, $2.50 and $3.09. There are 3,570 direct labor hours per month available for producing the two products. Product P requires 3 direct labor hours per unit and Product Q requires 4.5 direct labor hours per unit. The company can sell up to 800 units of each kind per month.
What is the maximum monthly contribution margin that Foster can generate under the circumstances? (Please round to nearest whole dollar.)

Question

Quizplus · Accepted Answer

C) Calculations:
($4.00 - $2.50)/3 =$0.50
($5.25 - $3.09)/4.5 = $0.48
800 × 3 = 2,400
2,400 × $0.50 = $1,200
3,570 - 2,400 = 1,170
1,170 × $0.48 = $562
$1,200 + $562 = $1,762

Foster Corporation Produces Two Products-P and Q