Todd Corporation produces two products, P and Q
P sells for $7.50 per unit; Q sells for $6.50 per unit. Variable costs for P and Q are $4.00 and $6.00, respectively. There are 7,300 direct labor hours per month available for producing the two products. Product P requires 5.00 direct labor hours per unit, and product Q requires 5.00 direct labor hours per unit. The company can sell as many of either product as it can produce. What is the maximum monthly contribution margin that Todd can generate under the circumstances? (Round to nearest whole dollar.)
A) $5,110
B) $730
C) $25,550
D) $3,650
A .A)
P Q
Sales price $7.50 $6.50
Variable costs 4.00 6.00
Contribution margin $3.5 $0.50
Product produced per direct hour 5.00 5.00
Contribution margin per direct labor hour $0.70 $0.10
Ranking 1.00 2.00
Hours
available No. of units
Total 7,300
P 7,300 1,460
Q 0 0
Sales of P $10,950.00
Less: Variable cost 5,840.00
Contribution margin $5,110
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