Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling pr

Question

Widgeon Co. manufactures three products: Bales; Tales; and Wales. The selling prices are: $55; $78; and $32, respectively. The variable costs for each product are: $20; $50; and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 7 hours to process, Tales take 4 hours, and Wales take 1 hour.

Which product has the highest contribution margin per machine hour?

What is the contribution margin per machine hour for Bales? Tales? Wales?

Assuming Widgeon Co. can sell all the products they can make, what is the maximum contribution margin they can earn per month?

Assuming that Wigeon produced enough product with the highest contribution margin per unit to use 1,000 hours on machine time. Product demand does not warrent any more production of that product. what is the maximum addition contribution margin that can be realized by utilizing the remaining 1,000 hours on the product with the second highest contribution margin per hour?

Explanation / Answer

bale Tales wales selling price $55 $78 $32 variable costs $20 $50 $15 contribution margin $35 $28 $17 hours taken to process $7 $4 $1 contribution margin per machine hour $5 $7 $17 Note:product Wales has highest contribution margin per hour. Machine hours in a month 2000 hours maximum contribution margin they can earn contribution margin per machine hour*no of hrs $10,000 $14,000 $34,000 contribution margin per unit to use 1000hours second highest contribution margin per hour $7 product tales addition contribtion margin 1000*7 7000 hour

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