Question

Assume the following information for Thomas Company:

Deluxe Chair:
Contribution margin per chair = $80
Machine hours to produce 1 chair = 2 hours
Executive Chair:
Contribution margin per chair = $90
Machine hours to produce 1 chair = 4 hours

Machine hours is the constraint resource.
What is the contribution margin per machine hour?

Answer 1

Well if you want to know that you have to do this:

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Margin per chair = $80

Machine hours to produce 1 chair = 2 hours

Multiply: 80 x 2 = 160

Deluxe Chair: 160

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Margin per chair = $90

Machine hours to produce 1 chair = 4 hours

Multiply: 90 x 4 = 320

Executive Chair: 320

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Contribution Margin: $90 and $80

Add: 90 + 80 = 170

Contribution Margin: $170

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Machine Hours: 2 and 4

Add: 2 + 4 = 6

Machine Hours: 6 hours

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So, their is $170 contribution margin per 6 hours.

Hope this helps XD