Carla Vista Innovations, Inc. produces exercise and fitness gear. Two of its new

Question

Carla Vista Innovations, Inc. produces exercise and fitness gear. Two of its newer products require a finishing process that can only be completed on machines that were recently purchased for this purpose. The machines have a maximum capacity of 6,000 machine hours, and no other products that the company makes use these machines Sarah Jacob, the company's operations manager, is preparing the production schedule for the coming month and can't seem to find enough machine time to produce enough units to meet the customer demand that the marketing department has included in the sales budget. Michael Stoner, the company's controller, has gathered the following information about the two products Dumbbell Weight Rack $51 19 Bench $60 16 8 Selling price per unit Direct materials Direct labor Variable overhead Fixed overhead Profit per unit Unit sales demand Machine hours per unit $20 4,000 0.5 10 $20 7,000

Explanation / Answer

Contribution margin per hour :

Dumbbell rack = 2080*.50 = 1040 hour

Weight bench = (6000-1040) = 4960 hour

Weight bench Dumbbell rack Sale price per unit 68 57 Variable cost per unit 30 26 Contribution margin per unit 38 31 machine hour per unit 0.80 0.50 Contribution margin per hour 47.50 62.00

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