Question

Assume the following information for Jones Company:
Deluxe Chair:
Contribution margin per chair $90
Machine hours to produce 1 chair 3 hours
Executive Chair:
Contribution margin per chair $100
Machine hours to produce 1 chair 5 hours
Machine hours is the constraint resource.
The contribution margin per machine hour is:

Answer 1

Answer:

For deluxe chair contribution margin per machine hour is $ 30

For Executive Chair contribution margin per machine hour is $ 20

Explanation:

Given:

For the Deluxe Chair,  

The contribution margin per chair = $ 90  

Machine hours required to produce 1 chair = 3 hours

Therefore,

the contribution margin per machine hour

= (  contribution margin per chair / Machine hours required per char )

or

= $ 90 / 3 = $ 30

Now, for the Executive Chair,  

Contribution margin per chair = $ 100  

Machine hours to produce 1 chair = 5 hours

Therefore,

the contribution margin per machine hour

= (  contribution margin per chair / Machine hours required per char )

or

= $ 100 / 5 = $ 20