Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20; $50; and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process, Tales take 7 hours, and Wales take 1 hour. What is the contribution per machine hour for Wales?
A) $35
B) $28
C) $17
D) $7

Question

Quizplus · Accepted Answer

To calculate the contribution per machine hour for Wales, we need to first calculate the contribution margin per unit of Wales:
Contribution margin per unit of Wales = Selling price of Wales - Variable cost per unit of Wales
Contribution margin per unit of Wales = $32 - $15 = $17

Next, we need to calculate the machine hours required per unit of Wales:
Machine hours required per unit of Wales = 1

Therefore, the contribution per machine hour for Wales is:
Contribution per machine hour for Wales = Contribution margin per unit of Wales ÷ Machine hours required per unit of Wales
Contribution per machine hour for Wales = $17 ÷ 1 = $17

Hence, the best choice is C, and the contribution per machine hour for Wales is $17.