Edge Company produces two models of its product with the same machine. The machine has a capacity of 138 hours per month. The following Information is available. Selling price per unit Variable costs per unit Contribution margin per unit Machine hours per unit Maximum unit sales per month Required: Contribution margin per unit 1. Determine the contribution margin per machine hour for each model. Product Contribution Margin Contribution margin per machine hour standard. $ 60 15 $ 45 Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin 1 hour 600 units Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin Deluxe $ 90 54 $36 2 hours 200 units Standard 2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Deluxe Deluxe 3. Assume the maximum demand for the Standard model is 70 units (not 600 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Total Deluxe Total

Cornerstones of Cost Management (Cornerstones Series)
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Author:Don R. Hansen, Maryanne M. Mowen
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Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...
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Edge Company produces two models of its product with the same machine. The machine has a capacity of 138 hours per month. The
following information is available.
Selling price per unit
Variable costs per unit
Contribution margin per unit
Machine hours per unit
Maximum unit sales per month
Required:
Contribution margin per unit
1. Determine the contribution margin per machine hour for each model.
Product Contribution Margin
Contribution margin per machine hour
Hours dedicated to the production of each product
Units produced for most profitable sales mix
Contribution margin per unit
Total contribution margin
Standard
$ 60
15
$45
1 hour
600 units
Hours dedicated to the production of each product
Units produced for most profitable sales mix
Contribution margin per unit
Total contribution margin
Deluxe
$ 90
54
$36
2 hours
200 units
2. How many units of each model should the company produce? How much total contribution margin does this mix
produce per month?
Standard
Total
Standard
Deluxe
3. Assume the maximum demand for the Standard model is 70 units (not 600 units). How many units of each model should
the company produce? How much total contribution margin does this mix produce per month?
Standard
Deluxe
Deluxe
Total
Transcribed Image Text:Edge Company produces two models of its product with the same machine. The machine has a capacity of 138 hours per month. The following information is available. Selling price per unit Variable costs per unit Contribution margin per unit Machine hours per unit Maximum unit sales per month Required: Contribution margin per unit 1. Determine the contribution margin per machine hour for each model. Product Contribution Margin Contribution margin per machine hour Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin Standard $ 60 15 $45 1 hour 600 units Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin Deluxe $ 90 54 $36 2 hours 200 units 2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Total Standard Deluxe 3. Assume the maximum demand for the Standard model is 70 units (not 600 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month? Standard Deluxe Deluxe Total
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