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. Assuming that Widgeon Co. can sell all of the products it can make, what is the maximum contribution margin it can earn per month

Question

contestada

Respuesta :

Tundexi Tundexi · Answer 1 · 2020-08-13T05:03:46+02:00

Answer:

$3,400

Explanation:

Particulars Bales Tales Wales

Selling price 55 78 32

- Variable costs 20 50 15

Contribution margin 35 28 17

Required hours to process 5 hrs 7 hrs 1 hrs

Contribution margin per hours 7 4 17

Therefore, Widgeon Co. will earn maximum contribution only if it uses all its machine hours for production of wales

Maximum contribution margin = Contribution margin per hour * Number of machine hours

Maximum contribution margin = 17 * 2,000 hours

Maximum contribution margin = $3,400