Share
Explore BrainMass

Unit contribution margin, contribution per labor-hour

Comfy Fit Company makes three sizes of shirts, small, medium and large, on one assembly line that has a limit of 600 labor-hours per week. Comfy Fit Company can seel all the shirts it can make under current operating capacity. Manufacturing information per shirt for each product is as follows:

Small Medium Large
Selling price $8 $12 $15
Variable costs 5 6 10
Labor hours per shirt 0.3 0.5 1.0

Requirements:

Determine the weekly contribution margin when all labor-hours are allotted to the product with the highest:

a. unit selling price.

b. unit contribution margin

c. contribution per labor-hour

Solution Preview

Selling price Variable cost Unit Contribution Labour hrs per shirt Contribution per labor hr
Small $8 $5 $3 =8 - 5 0.3 $10.00 =3/0.3
Medium $12 $6 $6 =12 - 6 0.5 $12.00 =6/0.5
Large $15 $10 $5 =15 - 10 1 $5.00 =5/1

Requirements:

Determine the weekly contribution margin when all labor-hours are allotted to the product with the highest:

a. unit selling price.

Large has the highest unit selling price at $15

Contribution per labor ...

Solution Summary

Determines the weekly contribution margin when all labor-hours are allotted to the product with the highest: unit selling price, unit contribution margin and contribution per labor-hour

$2.19