Question

Sunland Company can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $82 and takes two machine hours to make and Fancy has a unit contribution margin of $99 and takes three machine hours to make. There are 2400 machine hours available to manufacture a product. What should Sunland do?

Make Plain which creates $8 more profit per machine hour than Fancy does.

The same total profits exist regardless of which product is made.

Make Fancy which creates $24 more profit per unit than Plain does.

Make Plain because more units can be made and sold than Fancy.

Answer 1

	Plain	Fancy
Unit Contribution margin(a)	$                   82.00	$                        99.00
Machine Hours per unit(b)	2	3
Contribution margin per machine hours(a/b)	$                   41.00	$                        33.00
The Company should produce Plain as it provides $8($41-$33) more Profit per machine hours then Fancy does
So Option A is the answer