Clay Corporation manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp. The following per unit data are available: $$\begin{array} { | l | r | r | }
\hline & \text { Bedford Lamp } & \text { Lowell Lamp } \
\hline \text { Sale price } & \$ 25 & \$ 35 \
\hline \text { Variable costs } & \$ 17 & \$ 23 \
\hline \text { Machine hours required for 1 lamp } & 2 & 4 \
\hline
\end{array}$$ 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: $$\begin{array} { | l | r | r | } 
\hline & \text { Bedford Lamp } & \text { Lowell Lamp } \
\hline \text { Sale price } & \$ 25 & \$ 35 \
\hline \text { Variable costs } & \$ 17 & \$ 23 \
\hline \text { Machine hours required for 1 lamp } & 2 & 4 \
\hline
\end{array}$$ 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

Contribution margin per machine hour = (Selling price per unit - Variable cost per unit) / Machine hours required per unit= (25 - 17) / 2= $4 per machine hour

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