Sunland Innovations, Inc. produces exercise and fitness gear. Two of its newer p

Question

Sunland Innovations, Inc. produces exercise and fitness gear. Two of its newer products require a finishing process that can only be completed on machines that were recently purchased for this purpose. The machines have a maximum capacity of 6,000 machine hours, and no other products that the company makes use these machines. Sarah Jacob, the company's operations manager, is preparing the production schedule for the coming month and can't seem to find enough machine time to produce enough units to meet the customer demand that the marketing department has included in the sales budget. Michael Stoner, the company's controller, has gathered the following information about the two products: Dumbbell Rack Weight Bench $61 $52 21 16 w un o Selling price per unit Direct materials Direct labor Variable overhead Fixed overhead Profit per unit Unit sales demand Machine hours per unit 10 $21 $18 4,000 0.5 7,000 0.8

Explanation / Answer

Calculate contribution margin per machine hour :

Calculate total contribution margin :

Total contribution margin = (4000*46+2000*38.75) = 261500

Weight Bench Dumbbell Rack Sales price 52 61 Direct material (21) (16) Direct labour (5) (8) Variable overhead (3) (6) Contribution margin per unit 23 31 Machine hour per unit 0.5 0.8 Contribution margin per machine hour 46 38.75

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