Brief Exercise 1912 Sage Corporation manufactures two produc

Brief Exercise 19-12 Sage Corporation manufactures two products with the following characteristics. Unit Contribution Margin Machine Hours Required for Production Product 1 $42 0.15 hours 0.10 hours Product 2 $32 If Sage\'s machine hours are limited to 2,000 per month, determine which product it should produce. Sage Corporation should produce LINK TO TEXT INTERACTIVE TUTORIAL Ques

Solution

When Machine hours is the limiting factor, we have to calculate contribution per machine hour, which is equal to ........... Contribution Margin per Unit / Machine hours required per Unit

Product - 1 ............ 42 / 0.15 = $ 280 per hour

Product - 2 .......... 32 / 0.10 = $ 320 Per hour

As seen from above calculations it is evident that Product - 2 is having relatively better contribution margin per hour employed in production.

Sage corporation should produce .......... PRODUCT - 2