Edge Company produces two models of its product with the same machine. The machine has a capacity of 158 hours per month. The following information is available. StandardDeluxeSelling price per unit$ 160 $ 190 Variable costs per unit65 114 Contribution margin per unit$ 95 $ 76 Machine hours per unit1hour2hoursMaximum unit sales per month550units200unitsRequired: 1. Determine the contribution margin per machine hour for each model.Product Contribution MarginStandardDeluxe Contribution margin per unit$95$76 Machine hours per unit12Contribution margin per machine hour$95$38 2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month? StandardDeluxeTotalHours dedicated to the production of each product123Units produced for most profitable sales mix1580 Contribution margin per unit9576Total contribution margin$15,010$0$15,010 3. Assume the maximum demand for the Standard model is 80 units (not 550 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month? StandardDeluxeTotalHours dedicated to the production of each product10058158Units produced for most profitable sales mix100 Contribution margin per unit$95.00 Total contribution margin

The contribution margin is a fundamental financial indicator that calculates the profitability of a…

Answered: pany produces two models of its product…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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	Standard	Deluxe
Selling price per unit	$ 160		$ 190
Variable costs per unit	65		114
Contribution margin per unit	$ 95		$ 76
Machine hours per unit	1	hour	2	hours
Maximum unit sales per month	550	units	200	units

Required:

1. Determine the contribution margin per machine hour for each model.
Product Contribution Margin	Standard	Deluxe
Contribution margin per unit	$95	$76
Machine hours per unit	1	2
Contribution margin per machine hour	$95	$38

2. How many units of each model should the company produce? How much total contribution margin does this mix produce per month?
	Standard	Deluxe	Total
Hours dedicated to the production of each product	1	2	3
Units produced for most profitable sales mix	158	0
Contribution margin per unit	95	76
Total contribution margin	$15,010	$0	$15,010

3. Assume the maximum demand for the Standard model is 80 units (not 550 units). How many units of each model should the company produce? How much total contribution margin does this mix produce per month?
	Standard	Deluxe	Total
Hours dedicated to the production of each product	100	58	158
Units produced for most profitable sales mix	100
Contribution margin per unit	$95.00
Total contribution margin

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