Question

Metropole Inc. can produce three different products interchangeably on two machines. The accounting department provides the following information on these products: A B C Selling price per unit $24 $36 $46 Variable costs per unit $13 $28 $37 Units produced per machine hour 10 12.5 20 Minimum units produced 115 none 145 Maximum units produced 240 none 220 The total machine hours available are 105.

Determine the number of machine hours per unit for each product. (Round answers to 2 decimal places, e.g. 1.25.) Product A Product B Product C Number of hours per unit

Determine the contribution margin per machine hour for each product. (Round answers to 2 decimal places, e.g. 15.25.) Product A Product B Product C Contribution margin per machine hour $ $ $

Determine how many units of each product should be produced and the total contribution margin. Units Total CM Product A $ Product B Product C     Total contribution margin $

Answer 1

Correct Answer:

	A	B	C
no. of machine hours per unit	0.10	0.08	0.05

working:

		A	B	C
D	Units produced per machine hour	10	12.5	20
E = 1 HOUR /D	no. of machine hours per unit	0.1	0.08	0.05

requirement 2:

	A	B	C
Contribution margin per machine hour	$ 110.00	$ 100.00	$ 180.00

working:

	A	B	C
Sales price per unit	$    24.00	$    36.00	$    46.00
Variable cost per unit	$    13.00	$    28.00	$    37.00
Contribution margin per unit	$    11.00	$       8.00	$       9.00
Machine hour per unit	0.10	0.08	0.05
Contribution margin per machine hour	$ 110.00	$ 100.00	$ 180.00

Requirement 3:

	Units	Total CM
Product A	240	$        2,640
Product B	875	$        7,000
Product C	220	$        1,980

Working:

	D	E	F =D*E
	Maximum units that can be produced	Machine hour per unit	Machine hour used
Product A	240	0.10	24
Product C	220	0.05	11.00
Total machine hours used in producing product A and C			35.00

Total machine hours Available	105
Total machine hours used in producing product A and C	35
Total machine hours left to produce product B	70
Machine hour per unit required to produce product B	0.08
no. of units produced of product B (70/.08)	875

		Product
		A	B	C
Q	Sales price per unit	$    24.00	$        36.00	$    46.00
W	Variable cost per unit	$    13.00	$        28.00	$    37.00
G =Q-W	Contribution margin per unit	$    11.00	$          8.00	$       9.00
R	Machine hour per unit	0.10	0.08	0.05
T	Contribution margin per machine hour	$ 110.00	$     100.00	$ 180.00
	Ranking	II	III	I
H	No. of units produced	240.00	875	220.00
I =G*H	Total contribution margin	2,640.00	7,000.00	1,980.00

End of Answer.

Thanks