Question

contribution marginJayleen Company makes two products: Carpet Kleen and Floor Deodorizer. Operating information from the previous year follows. Carpet Kleen Floor Deodorizer Units produced and sold 5,000 4,000 Machine hours used 5,000 2,000 Sales price per unit $ 7 $ 10 Variable cost per unit $ 4 $ 8 Fixed costs of $20,000 per year are presently allocated equally between both products. If the product mix were to change, total fixed costs would remain the same. The contribution margin per machine hour for Floor Deodorizer is:

Answer 1

Contribution per machine hour = $4 per machine hour

Step-by-step explanation:

The contribution per machine is the total contribution made divided by the total machine hours consumed.

Contribution per machine hour = Total contribution/Total machine hours

The total contribution made = Unit contribution × unit sold

unit contribution = selling price - variable cost

= 10-8= $2 per unit

Total contribution = $2× 4,000= $8,000

Total machine hour = 2,000

Contribution per machine hour= 8,000/2,000 = $4 per machine hour

Contribution per machine hour = $4 per machine hour