Please please help, thanks!!! Range Rider Industries manufactures chairs and tab

Question

Please please help, thanks!!!

Range Rider Industries manufactures chairs and tables that are in high demand by local office furniture stores. Following is information for each of these products ChairsTables Selling price per item Variable cost per item Contribution margin per item Machine hours per item $62.00 51.00 $11.00 $76.00 64.00 $12.00 Range Rider has 900 machine hours available each month. The demand for chairs is 560 units per month and the demand for tables is 340 units per month. If Range Rider allocates its production capacity between the chairs and tables so that it maximizes the company's contribution margin, what will the contribution margin be? $10,240 $6,522 $6,744 $6,182

Explanation / Answer

Firstly, we need to calculate contrinution margin per hour of chair and table which is shown as follows:-

As the contribution per hour is higher for table, the available hours will firstly be allocated to Tables upto its maximum demand and then any remaining hours should be allocated to Chairs so that maximum contribution can be earned.

Hours Allocated to Tables = 340 units*1.6 hours = 544 hours

Remaining hours allocated to Chairs = (900 hours-544 hours) = 356 hours

Contribution = (544 hours*$7.50)+(356 hours*$6.875) = $4,080+$2,448 = $6,528

Thus the correct option will be $6,522

Particulars Chairs Tables Contribution margin per item (a) $11.00 $12.00 Machine Hours per item (b) 1.6 1.6 Contribution margin per hour (a/b) $6.875 $7.50

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