Contribution margin per machine hour


Problem:L Empire Company makes two products: Karpet Kleen and Fabric Kleen. Operating information from the previous year is as follows:

                                       Karpet Kleen      Fabric Kleen
Units produced & sold             5000                3000
Machine hours used                5000                2000
Sales price per unit                  $6                    $9
Variable cost per unit               $4                    $8

Fixed costs of $2000 per year are presently allocated equally between both products. If the product mix were to change, total fixed costs would remain the same.

A) The contribution margin per machine hour for Karpet Kleen is: ?

B) Assuming there is unlimited demand for both products and Empire has 12,000 machine hours available, how many units of each product should be produced and sold ?

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Accounting Basics: Contribution margin per machine hour
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