Question

Assume a company makes only three products, B, C, and D:

Answer 1

Answer:

d) $13

Explanation:

contribution margin per unit:

• product B = $45
• product C = $39
• product D = $25

contribution margin per machine hour:

• product B = $45 / 2.5 = $18
• product C = $39 / 3 = $13
• product D = $25 / 1.25 = $20

the company should first produce 800 units of product D and use 1,000 machine hours. Then it should produce 680 units of product B using 1,700 machine hours. In order to produce the remaining 20 units of product B and the 600 units of product C, the company must rent machine hours and the maximum possible price per hour is $13 (contribution margin per machine hour product C).