Blossom, Inc., is a small company that manufactures three versions of patio tabl

Question

Blossom, Inc., is a small company that manufactures three versions of patio tables. Unit information for its products follows Table A Table B Table C S 38 S 42 S 56 Sales price Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 7 2 2 4 Required number of labor hours Required number of machine hours 0.50 0.50 1.00 4.0 2.50 2.0 Blossom has determined that it can sell a limited number of each table in the upcoming year. Expected demand for each model follows: Table A Table B Table C 50,000 units 20,000 units 30,000 units

Explanation / Answer

Computation of contribution margin per labor hour and machine hour:

2. If Blossom Company has only 36,000 labor hours, the products should be emphasized in the order, Table B, Table A and Table C ( Contribution margin per labor hour)

4. If Blossom has only 230,000 machine hours available, the order of product emphasis should be Table C, Table B and Table A, i.e in order of contribution margin per machine hour.

Table A Table B Table C Selling price $ 38 $ 42 $ 56 Total variable cost 9 12 17 Contribution margin per unit 29 30 39 Labor hours required per unit 0.50 0.50 1.00 Contribution margin per labor hour 58 60 39 Machine hours required per unit 4 2.50 2 Contribution margin per machine hour 7.25 12 19.5

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