Question

Daisy Bath Products, Inc. (DBP) makes a variety of ceramic sinks and tubs. DBP has just developed a line of sinks and tubs made from a mixture of glass and ceramic. The sinks sell for $200 each and have variable costs of $70. The tubs sell for $700 and have variable costs of $320. The glass and ceramic sinks and tubs require the use of specialized molding equipment. The specialized molding equipment has 5,000 hours of capacity per year. A sink uses an average of 5 hours of specialized molding equipment time; a tub uses an average of 6 hours of specialized molding equipment time. ​

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What is the contribution margin per hour of specialized molding equipment time for sinks?

	a.	$26
	b.	$19
	c.	$30
	d.	$45
	e.	$51

Answer 1

Selling price per unit of sinks = $200

Variable cost per unit of sinks = $70

contribution margin per unit of sinks = Selling price per unit - Variable cost per unit

= $130

Time required to make 1 unit of sink = 5 hours

Contribution margin per hour of  specialized molding equipment time for sinks = contribution margin per unit / Time required to make 1 unit of sink

= 130/5

= $26

Correct option is a.

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