Clay Company manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp.The following per unit data are available:
$$\begin{array} { | l | l | l | }
\hline& \text { Bedford Lamp } & \text { Lowell Lamp } \
\hline \text { Sale price } & \$ 26 & \$ 37 \
\hline \text { Variable costs } & \$ 16 & \$ 22 \
\hline \text { Machine hours required for 1 lamp } & 2 & 6 \
\hline
\end{array}$$

Total fixed costs are $32,000,and Clay can sell a maximum of 12,000 units of each style of lamp annually.Machine hour capacity is 20,000 hours per year.What is the contribution margin per machine hour for the Bedford lamp?

Question

Clay Company manufactures two styles of lamps-a Bedford Lamp and a Lowell Lamp.The following per unit data are available:
$$\begin{array} { | l | l | l | } 
\hline& \text { Bedford Lamp } & \text { Lowell Lamp } \
\hline \text { Sale price } & \$ 26 & \$ 37 \
\hline \text { Variable costs } & \$ 16 & \$ 22 \
\hline \text { Machine hours required for 1 lamp } & 2 & 6 \
\hline
\end{array}$$

Total fixed costs are $32,000,and Clay can sell a maximum of 12,000 units of each style of lamp annually.Machine hour capacity is 20,000 hours per year.What is the contribution margin per machine hour for the Bedford lamp?

Quizplus · Accepted Answer

The contribution margin per unit for the Bedford Lamp is $26 - $16 = $10. Since each Bedford Lamp requires 2 machine hours, the contribution margin per machine hour is $10 / 2 = $5.

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