Question

Determining the Optimal Product Mix with One Constrained Resource Relax Spas provides two types of massage services, the Full Body and the Trouble Spots, with unit contribution margins of $198 and $90, respectively. Regardless of type, each massage requires the use of a certified masseuse. Relax Spas has four masseuses on staff who each work 1,500 hours per year. Each Full Body massage uses 90 minutes of masseuse time, and each Trouble Spot massage uses 30 minutes of masseuse time. Assume that there are no other constraints. Required: 1. What is the contribution margin per hour of masseuse time for each type of massage? When computing your answers, round contribution margin to two decimal places.

Answer 1

Answer:

Full body = $132

For trouble spots = $180

Explanation:

The computation of contribution margin per hour is shown below:-

For Full body

Contribution per service = $198

Massage time required in minutes = $90

Massage time required (90 min ÷ 60 min) = $1.5

Contribution per hour = $198 × $1.5

= $132

For Trouble spots

Contribution per service = $90

Massage time required in minutes = $30

Massage time required (30 min ÷ 60 min) = $0.5

Contribution per hour = $90 × $0.5

= $180