Question

Metropole Inc. can produce three different products interchangeably on two machines. The accounting department provides the following information on these products: A B C Selling price per unit $22 $36 $42 Variable costs per unit $12 $28 $33 Units produced per machine hour 10 12.5 20 Minimum units produced 120 none 150 Maximum units produced 220 none 220 The total machine hours available are 115. Determine the number of machine hours per unit for each product. Determine the contribution margin per machine hour for each product.Determine how many units of each product should be produced and the total contribution margin.

Answer 1

	A	B	C
Selling Price	22	36	42
Variable Cost	12	28	33
Contribution Margin	10	8	9
Units Produced per Machine Hour	10	12.5	20
Machine Hours per unit	0.1	0.08	0.05
Contribution Margin per Machine Hour	100	100	180
Ranking of Production	2nd	2nd	1st
Maximum Units required	220	NA	220
Minimum units required	120	NA	150
Machine Hours allocated on Minimum units Produced	12	0	7.5
Next Level of Production of units	100		70
Machine Hours allocated on based on above production	10		3.5
Remaining MH to be alloacted to Product B		82
Units Produced of Product B from remaining MHs		1025
Final Units Produced	220	1025	220
Final MHs Allocated	22	82	11
Total Contribution margin	2200	8200	1980