Tonix Corporation produces two products,P and Q.P sells for $7.00 per unit; Q sells for $6.00 per unit.Variable costs for P and Q are $3.00 and $5.00,respectively.There are 3,300 direct labor hours per month available for producing the two products.Product P requires 2.00 direct labor hours per unit,and product Q requires 2.00 direct labor hours per unit.The company can sell up to 300 units of each kind per month.What is the maximum monthly contribution margin that Todd can generate under the circumstances? (Round to nearest whole dollar. )

Question

Quizplus · Accepted Answer

The contribution margin per unit for P is $4 ($7 - $3) and for Q is $1 ($6 - $5). With 3,300 labor hours available and each product requiring 2 hours per unit, a maximum of 1,650 units can be produced. However, sales are limited to 300 units each. Therefore, the maximum contribution margin is (300 units of P * $4) + (300 units of Q * $1) = $1,200 + $300 = $1,500.

Tonix Corporation Produces Two Products,P and Q ?) $1,350\text { ?) } \$ 1,350 ?) $1,350

Tonix Corporation Produces Two Products,P and Q $\text { ?) } \$ 1,350$