Question

Mars Company manufactures and sells three products. Relevant per unit data concerning each product are given below:

		Product
		A		B		C
Selling price		$8		$15		$20
Variable costs and expenses		$5		$12		$17
Machine hours to produce		2		1		2

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. 1.25.)

		Product A		Product B		Product C
Contribution margin per unit of limited resource		$		$		$

eTextbook and Media

Assuming 3,000 additional machine hours are available, which product should be manufactured? Product BProduct AProduct C

eTextbook and Media

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		$

Answer 1

1
	Product A	Product B	Product C
Selling price	8	15	20
Less: Variable costs and expenses	5	12	17
Contribution margin per unit	3	3	3
Divide by Machine hours	2	1	2
Contribution margin per unit of limited resource	1.50	3.00	1.50
2
Product B should be manufactured
3
(1) Divided equally amoung the products	6000	=(1000*1.5)+(1000*3)+(1000*1.5)
(2) Allocated entirely to the product identified above	9000	=3000*3