Widgoon Co. manufactures three products: Bales, Tales, and Wales. The selling pr

Question

Widgoon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $32, respectively. The variable costs for each product are $20, $50, $10, repectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take S hours to process: Tales, 7 hours; and wales 1 hour. Assume that widgoon produced enough product with the highest contribution margin per unit to use 1,000 hours of machine time. Product demand does not warrent any more production of that product. What is the maximum additional contribution margin that can be realized by utilizing the remaining 1,000 hours on the product with the second highest contribution margin per hour? $ 1,400 $ 28,000 $ 4,000 $ 35,000

Explanation / Answer

As we have been given in the sum that copany aleady utilized the 1000 hours for highest margin product so we assume that company had utilixed it for wales . Now second highest margin is product bales and its CM is $ 7000

So the answer is $ 7000

Bales Tales Wales Sale price 55 78 32 Less: Variable Cost 20 50 15 Contribution Margin 35 28 17 Processing Machine time required Total 1000 1000 1000 Hours to take 5 7 1 Units (2000/ Hours for inr unit) 200 142.8571429 1000 Total contribution Margin
= Units * contribution 7000 4000 17000

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