Question

The Cuthill Company manufactures two products: M1 and H1. Each product uses skilled labour and the...

The Cuthill Company manufactures two products: M1 and H1. Each product uses skilled labour and the total hours of skilled labour available for the following year is limited to 23728 hours. Data for each of the two products is as follows:

M1

H1

Contribution margin per unit

$34.43

$52.86

Hours of skilled labour per unit

2.5

2.95

Maximum product demand (units)

6208

4177


What is the maximum contribution margin that can be achieved next year?

Select one:

a. $425174

b. $434538

c. $404556

d. $377878

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Homework Answers

Answer #1

Answer: Option D($377878)

Explanation:

M1 H1
Contribution margin per unit(a) 34.43 52.86
Hours of skilled labour per unit(b) 2.5 2.95
Contribution margin per hours of skilled labour(a/b) 13.772 17.91864
Therefore we should allocate the 23728 hours to the product H1 first
Demand(a) hrs(b) Total hrs(c=a*b) C.M.Per hr (d) Max.Contribution(c*d)
Contribution margin from product H1 4177 2.95 12322.15 18 220796
Contribution margin from product M1 4562 2.5 11405.85 14 157081
23728 377878
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