Question

Kitchen Convenience Company manufactures two products - toaster ovens and bread machines. The following data are available:

Toaster Ovens Bread Machines
Sales price $100 $160
Variable costs $20 $70

Kitchen Convenience can manufacture six toaster ovens per machine hour and four bread machines per machine hour. Kitchen Convenience's production capacity is 2,000 machine hours per month. What is the contribution margin per machine hour for bread machines?

A. $90
B. $540
C. $360
D. $80

Answer 1

Answer:

Option (c) is correct.

Explanation:

Given that,

Bread Machines:

Sales price = $160

Variable costs = $70

Production capacity = 2,000 machine hours per month

Contribution margin =  Selling price - Variable cost

                                 = $160 - $70

                                 = $90

Contribution margin per machine hour for bread machines:

= Contribution margin × Unit per hour

= $90 × 4

= $360