Buchnell Manufacturing has 80,600 labor hours available for producing M and N. C

Question

Buchnell Manufacturing has 80,600 labor hours available for producing M and N. Consider the following information:

  
If Buchnell follows proper managerial accounting practices in terms of setting a production schedule, how much contribution margin would the company expect to generate?

$72,960.

$177,960.

$178,560.

$182,760.

None of these.

Product M Product N   Required labor time per unit (hours) 5 6   Maximum demand (units) 6,200 8,600   Contribution margin per unit $ 12.00 $ 12.60   Contribution margin per labor hour $2.40 $ 2.10

Explanation / Answer

Product M units = 6200 Labor hours available for Product = 80600-(6200*5)= 49600 Product N units = 49600/6= 8266.67 Contribution margin=(6200*12)+(8266.67*12.6)= 178560 Option 3 is correct

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