Question

Brittany Furniture manufactures two​ products: Couches and Beds. The following data are​ available: Couches Beds Sales price ​ $700.00 ​ $900.00 Variable costs ​ $350.00 ​ $400.00 The company can manufacture two couches per machine hour and one bed per machine hour. The​ company's production capacity is 900 machine hours per month. What is the contribution margin per machine hour for couches based on the​ company's product​ mix?

Answer 1

Contribution margin for couches is $700 per machine hour

Step-by-step explanation:

Contribution = Sales Price - Variable Cost

Contribution per unit of Couches = $700 - $350 = $350

Total units in one hour = 2

Contribution per unit of Bed = $900 - $400 = $500

Total units in one hour = 1

Contribution per machine hour for couches = Contribution per unit of couches X number of units in one hour = $350 X 2 = $700 per machine hour.

Contribution margin for couches is $700 per machine hour.