Question

Excel Memory Company can sell all units of computer memory X and Y that it can produce, but it has limited production capacity. It can produce two units of X per hour or three units of Y per hour, and it has 4,000 production hours available. Contribution margin is $5 for product X and $4 for product Y. 1. Calculate contribution margin per production hour.

Answer 1

Product X Product Y

Contribution Margin per $10 $12

Production Hour

Step-by-step explanation:

The hours used in the product X and product Y is computed as:

Product X Product Y

Units produce in per hour 2 3

Hours used per units 1/2 = 0.5 1/3 = 0.333

The contribution margin per production hours is calculated as, divide the contribution margin by hours as shown below:

Product X Product Y

Contribution margin $5 $4

Hours used 0.5 0.333

Contribution margin per 5/0.5 = 10 4/0.333 = 12

Production Hour