Question

Company Delta can produce two different straws, the Delta Fun Straw, which is made of polypropylene plastic, and the Delta Eco Straw, which is a biodegradable straw. The company has 10,000 machine hours available to produce these products.

Per batch	Delta Fun Straw	Delta Eco Straw
Sales price	$2.00	$6.00
Variable expenses	$0.50	$3.00
Contribution margin	$1.50	$3.00
Contribution margin ratio	75%	50%

One batch of Delta Fun Straw requires 5 machine hours and one batch of Delta Eco Straw requires 8 machine hours.

Required:

What is the contribution of each product per machine hour?

Which product should be emphasised and why?

Answer 1

	Delta Fun Straw	Delta Eco Straw
Contribution margin per batch	1.50	3.00
Divide by machine hours per batch	5	8
Contribution margin of product per machine hour	0.300	0.375

Delta Eco Straw should be emphasised.

Delta Eco Straw provides greater contribution margin of product per machine hour so it should be produced first.

Any remaining machine hours after production of Delta Eco Straw should be used to produce Delta Fun Straw.