Consider the following production and cost data for two products, L and C: A total of 60,000 machine minutes are available each period and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period?
A) $720,000
B) $840,000
C) $780,000
D) $1,560,000

Question

Consider the following production and cost data for two products, L and C:  A total of 60,000 machine minutes are available each period and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period?
A) $720,000 
B) $840,000 
C) $780,000 
D) $1,560,000

Quizplus · Accepted Answer

11eacbfc_c639_1cb9_8ffe_0d0f3abf8591_TB7552_00 Because there is unlimited demand for each product, all of the available capacity should be used to produce Product C.
Production of Product C = 60,000 machine minutes ÷ 8 machine-minutes per unit = 7,500 units
Total contribution margin = $112 per unit × 7,500 units = $840,000

Consider the Following Production and Cost Data for Two Products