Clay Corporation manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp.The following per unit data are available: Total fixed costs are $30,000,and Clay can sell a maximum of 10,000 units of each style of lamp annually.Machine hour capacity is 25,000 hours per year.
-What is the contribution margin per machine hour for the Bedford lamp?

Question

Clay Corporation manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp.The following per unit data are available:  Total fixed costs are $30,000,and Clay can sell a maximum of 10,000 units of each style of lamp annually.Machine hour capacity is 25,000 hours per year.
-What is the contribution margin per machine hour for the Bedford lamp?

Quizplus · Accepted Answer

To calculate the contribution margin per machine hour for the Bedford lamp, we need to first calculate the contribution margin per unit for the Bedford lamp.

Contribution margin per unit for Bedford Lamp = Sales price per unit - Variable cost per unit
= $60 - $24 - $7 - $6
= $23

Variable cost per unit includes direct materials, direct labor, and variable overhead.

Now, we can calculate the contribution margin per machine hour:

Contribution margin per machine hour for Bedford Lamp = Contribution margin per unit / Machine hours per unit
= $23 / 2
= $11.5

Therefore, the contribution margin per machine hour for the Bedford Lamp is $4.6 ($11.5/2.5).
The best choice is A, with an explanation as above.

Clay Corporation Manufactures Two Styles of Lamps-A Bedford Lamp and a Lowell