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Sellingprice variablecosts directmaterials

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Unformatted text preview: Demanded (3) = (1) × (2) 5,400 11,250 39,000 55,650 2 2. Selling price Variable costs: Direct materials Variable machining Sales commissions (5%, 5%, 10%) Total variable costs Contribution margin per unit 3. Nealy $3,000 750 600 Tersa $2,100 500 500 Pelta $800 100 200 150 1,500 $1,500 105 1,105 $ 995 80 380 $420 Total machine hours needed to satisfy demand exceed the machine hours available (55,650 needed > 50,000 available). Consequently Marion Taylor needs to evaluate these products based on the contribution margin per machine hour. Nealy Tersa Pelta Unit contribution margin $1,500 $995 $420 Machine‐hours (MH) per unit ÷3 MH ÷2.5 MH ÷1 MH Unit contribution margin per MH $ 500 $398 $420 Based on this analysis, Marion Taylor should produce to meet the demand for products with the highest unit contribution margin per machine hour, first Nealy, then Pelta, and finally Tersa. The optimal product mix will be as follows: Nealy Pelta Tersa Total 1,800 units = 5,400 MH 39,000 units = 39,000 MH 2,240 (5,600 MH ÷ 2.5 MH/unit) units = 5,600 MH (50,000 ─ 5,400 ─ 39,000) 50,000 MH 4. The optimal product mix...
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