Question

A.C. Tech Manufacturing Appliances manufactures three sizes of kitchen​ appliances: small,​ medium, and large. Product information is provided below. Small Medium Large Unit selling price ​$450 ​$620 ​$1,240 Unit​ costs: Variable manufacturing ​(240) ​(280) ​(530) Fixed manufacturing ​(80) ​(140) ​(250) Fixed selling and administrative ​ (110) ​ (125) ​ (130) Unit profit ​$20 ​$75 ​$330 Demand in units 110 140 110 Machineminus−hours per unit 40 70 110 The maximum machineminus−hours available are​ 6,500 per week. What is the contribution margin per machineminus−hour for a medium​ appliance?
A. ​$0.54
B. ​$7.79
C. ​$1.07
D. ​$4.86

Answer 1

Answer:

contribution margin per machine = $4.86

so correct option is D. ​$4.86

Explanation:

given data

                                                       Small   Medium   Large

Unit selling price                            ​$450   ​$620 ​       $1,240

Unit​ costs: Variable manufacturing (240)   ​(280)       ​(530)

Fixed manufacturing ​                         (80) ​    (140)       ​(250)

Fixed selling and administrative ​       (110) ​    (125) ​      (130)

Unit profit ​                                            $20     ​$75 ​       $330

Demand in units                                  110       140          110

Machine minus−hours per unit           40        70           110

to find out

contribution margin per machine minus hour for a medium​ appliance

solution

we get here contribution margin for medium that is express as

contribution margin = selling price - variable cost ............1

contribution margin = $620 - $280

contribution margin = $340

so contribution margin per machine will be as

contribution margin per machine = $\frac{contribution\ margin}{machine\ per\ hour}$   ................2

put here value we get

contribution margin per machine = $\frac{340}{70}$

contribution margin per machine = $4.86

so correct option is D. ​$4.86