Question

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales 7 hours; and Wales 1 hour. The contribution per machine hour for Wales is

Answer 1

The contribution per machine hour for wales = $17 per hour

Step-by-step explanation:

contribution per machine hour is the contribution margin divided by the number of machine hours used for the equivalent production.

Contribution margin on the other hand, is the aggregate amount available on the sale of a product, after all the associated variable costs have been deducted.

The contribution per machine hour = contribution margin ÷ machine hour

Contribution margin = selling price - variable costs

For wales; selling price = $32; variable costs = $15; machine hour = 1 hour

∴ contribution margin per machine hour = (32- 15) ÷ 1

= 17 ÷ 1 = $17 per hour.