chapter 12 hw 3

Chapter 12 - Homework 3 Selling Price Variable Costs Contribution Margin Product A Product B Product C $ 100.00/unit $ 150.00/unit $ 200.00/unit $ 40.00/unit $70.00/unit $100.00/unit $ 60.00/unit $ 80.00/unit $ 100.00/unit Maximum Demand 5000 units 4000 units 2000 units Direct labor hours/unit 3 hours/unit 5 hours/unit 10 hours/unit To produce the total units of the three products demanded, the firm will need a total of 55,000 direct labor hours. Assume the firm has excess capacity in machine hours but only 40,000 direct labor hours. o What is the contribution margin per direct labor hour for each product? o How much of each product should the firm produce given your findings concerning the contribution margin per hour? o What is the maximum total contribution margin earned by the firm with only 40,000 direct labor hours