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Excel Memory Company can sell all units of computer memory X and Y that it can produce, but it has limited production capacity
Excel Memory Company can sell all units of computer memory X and Y that it can produce, but it has limited production capacity. It can produce two units of X per hour or three units of Y per hour, and it has 4,050 production hours available. Contribution margin is $7 for product X and $6 for product Y. 1. Calculate contribution margin per production hour. Contribution Margin per Production Hour Product X Product Y Contribution margin per production hour
Expert Solution
Answer:
(1) Computation of contribution margin per production hour
| Contribution margin per production hour | ||
| Product X | Product Y | |
| Contribution margin per unit (A) | $7 | $6 |
| Production hours per unit* (B) | 0.5 | 0.33 |
| Contribution margin per production hour (A) / (B) | $14 | $18.18 |
Working note :
(1)
Contribution margin per production hour = Contribution margin per unit / Production hours per unit
(2)
Computation of production hours per unit :
| Product X | Product Y |
|
It can produce 2 units in 1 hour Hence hours required to produce 1 units = 1/2 = 0.5 hour |
It can produce 3 units in 1 hour Hence hours required to produce 1 units = 1/3= 0.33 hour |
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