Question 1 Mars Company manufactures and sells three products. Relevant per unit

Question

Question 1 Mars Company manufactures and sells three products. Relevant per unit data concerning each product are given below Product Selling price Variable costs and expenses Machine hours to produce $10 $13 $18 $5 $11 $15 Compute the contribution margin per unit of limited resource (machine hours) for each product. (Round contribution margin per unit to 2 decimal places, e.g. 1.50.) Product A Product B Product C Contribution margin per unit of limited resource s Assuming 3,000 additional machine hours are available, which product should be manufactured? What is the total contribution margin if the hours are (1) divided equally amoung the products and (2) if they are allocated entirely to the product identified above Total contribution margin (1) Divided equally amoung the products (2) Allocated entirely to the product identified above

Explanation / Answer

1st part

working note:

2nd part

Assuming 3000 additonal hours are available , which product should be manufactured? Product A.

(since its contribution per machine hour is highest).

3rd part.

dividing 3,000 hours equally means 1,000 hours will be allocated to each of product A B C.

Product A Product B Product C contribution margin per unit of limited resource $2.50 $2.00 $1.50

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