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Practice Question 8 Product A has a unit contribution margin (UCM) of $200 and P

ID: 2375128 • Letter: P

Question

Practice Question 8

Product A has a unit contribution margin (UCM) of $200 and Product B a UCM of $100. Product A takes 10 hours to produce and Product B takes 2 hours to produce.

a.            What is the contribution margin per hour for Product A?                                                                  

b.            What is the contribution margin per hour for Product B?                                                                

c.            If the company has a limited number of hours available, which product should be produced first?

                                                                                                                                                           

d.            If the company has a 1,000 hours available and can sell a maximum of 300 units of Product A and 200 units of Product B, how many units of each could be produced?

                                                                                                                                                           

Explanation / Answer

Product A has a unit contribution margin (UCM) of $200 and Product B a UCM of $100. Product A takes 10 hours to produce and Product B takes 2 hours to produce.

a.            What is the contribution margin per hour for Product A?

$20 per hour

b.            What is the contribution margin per hour for Product B?

$50 per hour                                                                

c.            If the company has a limited number of hours available, which product should be produced first?

Product B

d.            If the company has a 1,000 hours available and can sell a maximum of 300 units of Product A and 200 units of Product B, how many units of each could be produced?

Company should prouce :

Product B = 200 unit

Product A = (1000-200*2)/10 = 60 Unit

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