Johnstone Company makes 2 products: Carpet Kleen and Floor deodorizer. Operating

Question

Johnstone Company makes 2 products: Carpet Kleen and Floor deodorizer. Operating information from the previous year follows. carpet kleen units products and sold 5,000, machine hours used 5,000, sales price per unit $7, Variable cost per unit $4. Floor deodorizer units produced and sold 4,000, machine hours used 2,000, sales price per unit $10, variable cost per unit $8. Fixed costs of $20,000 per year are presently allocated equally between both products. If the product mix were to change, total fixed costs would remain the same. The contribution margin per machine hour for Floor deodorizer is?

Explanation / Answer

Johnson Company Carpet Kleen Floor Deodorizer Sales units 5000 4000 Machine Hour used 5000 2000 Sales Price Per unit $                          7.00 $                    10.00 Variable Cost Per unit $                          4.00 $                       8.00 Total Selling Price $               35,000.00 $            40,000.00 Variable Cost $               20,000.00 $            32,000.00 Contribution Margin $               15,000.00 $              8,000.00 Fixed Cost $               10,000.00 $            10,000.00 Profit $                  5,000.00 $            (2,000.00) Contribution margin per hour $                          3.00 $                       4.00 Contribution margin Per machine hour of floor deodorizer is $ 4

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