Exercise 19-11

Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below.

Product

A B C

Selling price $15 $14 $16

Variable costs and expenses $7 $12 $14

Machine hours to produce 2 1 2

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Compute the contribution margin per unit of the limited resource (machine hours) for each product. (Round contribution margin per unit to 2 decimal places, e.g. 1.25.)

Product A Product B Product C

Contribution margin per unit of limited resource $

$

$

Assuming 1,620 additional machine hours are available, which product should be manufactured?

Prepare an analysis showing the total contribution margin if the additional hours are:

(1) Divided equally among the products. (Round contribution margin per unit to 2 decimal places, e.g. 1.25.)

Product

A B C

Machine hours

Contribution margin per unit of limited resource $

$

$

Total contribution margin $

$

$

The total contribution margin $

(2) Allocated entirely to the product identified above.

Machine hours

Contribution margin per unit of limited resource $

Total contribution margin $