A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 5,000 machine hours available to manufacture a product, income will be:

a. $10,000 more if Product A is made.

b. $10,000 less if Product B is made.

c. $10,000 less if Product A is made.

d. the same if either product is made.

Question

Trey

Business

14 August, 13:05

A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 5,000 machine hours available to manufacture a product, income will be:

a. $10,000 more if Product A is made.

b. $10,000 less if Product B is made.

c. $10,000 less if Product A is made.

d. the same if either product is made.

+3

Answers (1)

Know the Answer?

Natasha Bradley · Answer 1

Product B has a net income of $10,000 superior to Product A.

The correct answer is C.

Explanation:

Giving the following information:

Product A:

Unitary contribution margin = $16

Machine-hours required = 2

Product B:

Unitary contribution margin = $30

Machine-hours required = 3

First, we will calculate the total income of both products.

Product A = 16 * (5,000/2) = $40,000

Product B = 30 * (5,000/3) = $50,000

Product B has a net income of $10,000 superior to Product A.