Candial Enterprises can produce and sell only one of the fol

Candial Enterprises can produce and sell only one of the following two products: Machine Hours Unit Contribution Required Margin

Product A 0.6(Required) $4.50 (Margin)

Product B 0.4 (Required) $3.20 (Margin)

The company has machine capacity of 1,496 hours. How much will contribution margin be if Candial produces only the most profitable product?

A) $3,740 B) $11,968 C) $2,493 D) $11,220

Solution

Product A Product B Machine Hour Required 0.60 0.40 Contribution Margin Per Unit 4.50 3.20 Contribution Margin Per Machine Hour 7.50 8.00 Rank based on CM per MH II I Machine Hour Capacity 1496 Machine Hour Required PU of Product B 0.40 A Total Units Produced 3740 B Contribution Margin Per Unit 3.20 A*B Total Contribution Margin 11968 Answer is B) 11968/-