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Gamble Company has only 25,000 hours of machine time each month to manufacture its two products. Product X has a contribution margin of $50, and Product Y has a contribution margin of $64. Product X requires 5 hours of machine time, and Product Y requires 8 hours of machine time. If Gamble Company can sell up to maximum of 4,000 units of Product X and 4,000 units of Product Y, at the optimum product mix of X & Y, the company will have a total contribution margin of:_________.
a. $250,000.
b. $240,000.
c. $210,000.
d. $200,000.

Respuesta :

anthougo

Gamble Company will have a total contribution margin of b. $240,000.

Data and Calculations:

Available machine hours for the month = 25,000 hours

                                                 Product X     Product Y       Total

Contribution margin                 $50                $64

Machine time required per unit 5 hours        8 hours

Maximum sales units             4,000 units      4,000 units

Contribution margin per

 machine time (hour)             $10 ($50/5)      $8 ($64/8)

Total machine time required 20,000           32,000         52,000 hours

At optimum produce, produce 4,000 units  625 units

Contribution margin =         $200,000         $40,000    $240,000

                                         ($50 x 4,000)    ($64 x 625)

Thus, at the optimum product mix of Product X and Product Y, Gamble Company will have a total contribution margin of $240,000.

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