Question

Hanson Selling price 54.00 36.00 44.00 Variable cost per unit $ 38.00 $ 14.00 $ 29.00 Direct labor hours per unit 1.8 3.2 2.2 Demand 1,200 2,200 700. What is the total contribution margin if prioritizes production according to its limited resources?

Answer 1

$32,703

Step-by-step explanation:

In limited resources we choose the highest contributing product to be manufacture first and so on.

It is assumed that total labor hour available are 5,000 hours.

Selling Price $54 $36 $44

- Variable cost $38 $14 $29

Contribution margin $16 $22 $15

Labor hours per unit 1.8 3.2 2.2

Demand 1200 2200 700

Total Labor Hours 2,160 7,040 1,540

To maximize the return we will choose the highest contributing product first.

Total Contribution = Demand for Highest contributing product x Contribution margin x Available resource / total resource required

Total Contribution = 2,200 x 22 x 5000/7040 = $32,702.7 = $32,703