Decker Products Decker Products manufactures standard and deluxe wooden swing sets. Selected data related to each product is as follows:
Most of the manufacturing process for the sets is done on machines. There is a maximum of 10,000 machine hours available each year.
Refer to the Decker Products information above. What is the contribution margin per unit of limited resource for each type of set?

Question

Decker Products Decker Products manufactures standard and deluxe wooden swing sets. Selected data related to each product is as follows:
 Most of the manufacturing process for the sets is done on machines. There is a maximum of 10,000 machine hours available each year.
Refer to the Decker Products information above. What is the contribution margin per unit of limited resource for each type of set?

Quizplus · Accepted Answer

To calculate the contribution margin per unit of limited resource, we need to divide the contribution margin per unit by the number of machine hours required per unit.

For the standard swing set:
Contribution margin per unit = selling price per unit - variable cost per unit
= $1,000 - $600
= $400

Machine hours required per unit = 4

Contribution margin per unit of limited resource = $400 / 4 = $100

For the deluxe swing set:
Contribution margin per unit = selling price per unit - variable cost per unit
= $1,500 - $900
= $600

Machine hours required per unit = 6

Contribution margin per unit of limited resource = $600 / 6 = $100

Therefore, the contribution margin per unit of limited resource for both types of sets is the same, $100. The best choice is to produce the standard swing set since it requires fewer machine hours per unit and will allow for more units to be produced within the limited resource constraint of 10,000 machine hours.

Decker Products Decker Products Manufactures Standard and Deluxe Wooden Swing