Mid-Atlantic Yachts manufactures boats for seafarers. Its most popular model can
ID: 2564005 • Letter: M
Question
Mid-Atlantic Yachts manufactures boats for seafarers. Its most popular model can accommodate twelve people and sells for $865,000. Manufacturing and other costs, all per unit, are as follows:
Mid-Atlantic has a constraint on how many yachts can be built in a year, because yacht building is a highly skilled endeavor and qualified machinists are difficult to find and retain. If the labor rate is $90 per hour, this is the only model being produced, and quantity is limited to 275 yachts per year, what is the total contribution margin of yacht manufacturing?
A : $161,356,250.
B : $136,056,250.
C : $171,806,250.
D : $144,306,250.
Explanation / Answer
Per unit 275 yachts Revenue 865000 237875000 Variable costs: Direct material 85000 23375000 Direct labor 155250 42693750 Variable overhead 35000 9625000 Variable sales and administrative expenses 65000 17875000 Total variable costs 93568750 Total contribution margin 144306250 Option D is correct