Question

Family furniture manufactures two products: chairs and sofas. The following data are available: Sales price variable costs chairs $520 $380 sofas $740 $375 the company can manufacture 4 chairs per machine hour or 1 sofa(s) per machine hour. The company's production capacity is 1,000 machine hours per month. What is the contribution margin per machine hour for sofas?

a. $365
b. $1,825
c. $1,115
d. $1,460

Answer 1

The contribution margin per machine hour for sofas is $365.

Step-by-step explanation:

To calculate the contribution margin per machine hour for sofas, we first need to determine the contribution margin of sofas. The contribution margin is the difference between the sales price and the variable cost of a product. For sofas, the contribution margin is $740 - $375 = $365.

Next, we need to determine the number of sofas that can be produced per machine hour. The company can manufacture 1 sofa per machine hour.

Finally, to calculate the contribution margin per machine hour for sofas, we divide the contribution margin of sofas by the number of sofas produced per machine hour. Therefore, the contribution margin per machine hour for sofas is $365 / 1 = $365.