Question

Comfy Fit Company manufactures two types of university sweatshirts, the Swoop and the Rufus, with unit contribution margins of $5 and $15, respectively. Regardless of type, each sweatshirt must be fed through a stitching machine to affix the appropriate university logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Swoop sweatshirt requires 6 minutes of machine time, and each Rufus sweatshirt requires 20 minutes of machine time. Assume that a maximum of 40,000 units of each sweatshirt can be sold. Required: 1. What is the contribution margin per hour of machine time for each type of sweatshirt

Answer 1

The contribution margin per hour of machine time for the Swoop and Rufus sweatshirts are $50 and $45, respectively, with the Swoop sweatshirt having a higher contribution margin per machine hour.

Step-by-step explanation:

To calculate the contribution margin per hour of machine time for each type of sweatshirt manufactured by Comfy Fit Company, we need to divide the unit contribution margins by the time it takes to make each sweatshirt.

For the Swoop sweatshirt: It takes 6 minutes of machine time, which is 1/10th of an hour (since 60 minutes = 1 hour). So, the contribution margin per hour is $5 divided by 1/10, which is $50 per hour.

For the Rufus sweatshirt: It takes 20 minutes of machine time, which is 1/3rd of an hour. So, the contribution margin per hour is $15 divided by 1/3, which is $45 per hour.

Therefore, the Swoop sweatshirt has a higher contribution margin per hour of machine time than the Rufus sweatshirt.

Answer 2

Comfy Fit Company

Contribution margin per hour of machine time:

Contribution margin for 1 hour of machine time will be equal to:

Swoop = $5 x 60/6 = $50 per hour

Rufus = $15 x 60/6 = $150 per hour

Step-by-step explanation:

If Contribution margin:

Swoop = $5 for 6 minutes' machine time

Rufus = $15 for 6 minutes' machine time

Therefore, contribution margin per hour will be

Contribution x 60/6.

Since 60 minutes make an hour, there will be ten times more contribution for each.

This gives an hourly contribution of $50 ($5 x 10) and $150 ($15 x 10).