Exercise 19-11 Spencer Company manufactures and sells three products. Relevant p
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Question
Exercise 19-11 Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below. 19-6 Prod ore sults by Study Selling price Variable costs and expenses Machine hours to produce $15 14 $18 7 $12 $16 Compute the contribution margin per unit of the limited resource (machine hours) for each product. (Round contribution margin per unit to 2 decimal places, e.g. 1.25.) Contribution margin per unit of limited resources LENK TO Assuming 1,650 additional machine hours are available, which product should be manufactured? Prepare an analysis showing the total contribution margin if the additional hours are: (1) Divided equally among the products. (Round contribution margin per unit to 2 decimal places, e.g 1.25.)Explanation / Answer
Contribution margin per unit of limited resources: Product A: 15-7/2=4, Product B= 14-12/1=2, Product C= 18-16/2=1
If 1650 additional hours are available than Product A should be produced.
(1)
product A B C
machine hours: 550 550 550
Contribution margin per unit of limited resource 4 2 1
Total Contribution Margin $2200 $1100 $550
The Total Contribution Margin $3850
(2)
Machine hours 1650 hours
Contribution margin per unit of limited resources(Product A) $4
Total Contribution margin $6600
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