Consider the following production and cost data for two products, L and C: Product L Product C...
Question:
Consider the following production and cost data for two products, L and C:
| Product L | Product C | |
|---|---|---|
| Contribution margin per unit | $25 | $20 |
| Machine set-ups needed per unit | 5 set-ups | 2 set-ups |
The company can only perform 14,300 machine set-ups each period due to limited skilled labor and there is unlimited demand for each product.
What is the largest possible total contribution margin that con be realized each period?
a. $128,700
b. $133,350
c. $143,000
d. $157,300
Contribution Margin:
Contribution margin helps in optimum utilization of available resources. It helps to design the sales mix such that it results in maximum profit. The formula for computing the contribution margin is selling price less the variable costs.
Answer and Explanation: 1
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View this answerThe correct option is (c.) $143,000
Computation of contribution margin per set-up
| Product L | Product C | |
|---|---|---|
| Cont... |
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Contribution Margin: Definition & Formula
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Chapter 22 / Lesson 20
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Understand what the contribution margin is. Learn the definition of contribution margin and understand its importance in business. Discover how to calculate it through examples.
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