Spencer Company_Use of limited resource

| June 14, 2016

Question

Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below.
Product
A B C
Selling price $9 $12 $14
Variable costs and expenses $3 $9.50 $12
Machine hours to produce 2 1 2
Instructions:
(a) Compute the contribution margin per unit of the limited resource (machine hour) for each product.
(b) Assuming 1,500 additional machine hours are available, which product should be manufactured?
(c) Prepare an analysis showing the total contribution margin if the additional hours are

(1) divided equally amongthe products.

(2) Allocated entirely to the product identified in the section above

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