Wright, Inc. produces three products. Data concerning the selling prices and uni
ID: 2476110 • Letter: W
Question
Wright, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Product C D E Selling price $ 100 $ 80 $ 110 Variable costs $ 60 $ 50 $ 65 Fixed costs 10 5 7 Tapping machine time (minutes) 10 6 5 Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The tapping machine is the constraint, with only 2,800 minutes of tapping machine time available this week
A. Calculate the contribution margin per minute for all three products.
Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of tapping machine time?
b.Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of tapping machine time?
Explanation / Answer
A.
b.
If additional tapping machine time would be used to produce more of product E, the time would be worth 60*$9 = $540 per hour.
C D E Selling Price 100 80 110 Variable costs 60 50 65 Contribution Margin 40 30 45 Tapping Machine Time (Minutes) 10 6 5 Contribution Margin per minute 4 5 9Related Questions
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