Consider the following production and cost data for two products, X and Y:
|Product X||Product Y|
|Contribution margin per unit||$39.00||$28.00|
|Machine hours needed per unit||3 hours||2 hours|
The company has 20,000 machine hours available each period, and there is unlimited demand for each product.
What is the largest possible total contribution margin that can be realized each period?
Contribution margin is the amount that is left after paying variable expenses. The contribution margin facilitates the organization to cover its fixed costs which in turn helps to determine the profit/loss.
Answer and Explanation: 1
Table showing possible total contribution margin:
|Particulars||Product X||Product Y|
|1. Machine hours (per unit)||3 hours||2 hours|
|2. Available machine...|
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fromChapter 22 / Lesson 20
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.