Henke Company has only 30,000 hours of machine time each month to manufacture its two products.Product X has a contribution margin of $60,and Product Y has a contribution margin of $72.Product X requires 6 hours of machine time,and Product Y requires 10 hours of machine time.If Thomas Company wants to dedicate 85 percent of its machine time to the product that will provide the most income,the company will have a total contribution margin of
A)$216,000
B)$228,600.
C)$287,400
D)$300,000

Question

Quizplus · Accepted Answer

First, we need to calculate how many hours of machine time each product will require if we dedicate 85% of the time to the more profitable product:

Product X: 0.85 * 30,000 hours = 25,500 hours
Product Y: 0.15 * 30,000 hours = 4,500 hours

Next, we need to calculate how many units of each product we can produce with these hours of machine time:

Product X: 25,500 hours ÷ 6 hours per unit = 4,250 units
Product Y: 4,500 hours ÷ 10 hours per unit = 450 units

Now, we can calculate the contribution margin for each product:

Product X: $60 per unit * 4,250 units = $255,000
Product Y: $72 per unit * 450 units = $32,400

The total contribution margin for both products is $287,400 (i.e. $255,000 + $32,400). Therefore, the best choice is C.

Henke Company Has Only 30,000 Hours of Machine Time Each