Question

The company has 15,000 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?

Answer 1

The answer in this question is $135,000.Solution to get the answer is For X the company earns $24/3 = $8/MH; for Y the company earns $18/2 = $9/MH; hence, the company would want to specialize in producing Y. The company can make 15,000/2 = 7,500 units of Y, earning a total CM of 7,500 x $18 = $135,000. (This can also be calculated as $9 x 15,000.)