Exercise 7-18 Maximizing the Contribution Margin Given a Limited Resource Only t

Question

Exercise 7-18
Maximizing the Contribution Margin Given a Limited Resource

Only two machines are capable of stitching the footballs. They have a maximum capacity of 3,000 total stitching hours per year.

Required:

A. What is the contribution margin per limited resource for each type of football? Round your answer to nearest cent if necessary.

B. Assuming that demand is not a constraint, how many pigskin and artificial leather football batches should be produced by Footballs Galore considering available stitching hours as a constraint resource? If no batches of a product should be produced, enter "0".

Contribution Margin Pig-skin football $ per stitching hour Artificial leather football $ per stitching hour Maximizing the Contribution Margin Given a Limited Resource Footballs Galore produces both pigskin and artificial leather footballs that are stitched by one of two machines. Selected data related to producing a batch of 10 footballs for each product follow: Only two machines are capable of stitching the footballs. They have a maximum capacity of 3,000 total stitching hours per year. Required: A. What is the contribution margin per limited resource for each type of football? Round your answer to nearest cent if necessary. Assuming that demand is not a constraint, how many pigskin and artificial leather football batches should be produced by Footballs Galore considering available stitching hours as a constraint resource? If no batches of a product should be produced, enter "0".

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Part B:

Since there is no constraint on the demand, Footballs Galore will use all the 3000 hours in the production of Artificial Leather with zero production for pigskin.

Production

Pigskin = 0 Batches.

Artificial Leather = 3000/1 = 3000 Batches.

Thanks.

Pigskin Artificial Leather Sales Price 500 250 Direct Materials 150 50 Direct Labor 45 40 Variable Overhead 30 20 Contribution Margin (10 Units) 275 140 Stitching Hour 2 1 Contribution Margin Per Stitching Hour 137.5 140

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