Excel Memory Company can sell all units of computer memory X and Y that it can produce, but it has limited production capacity. It can produce two units of X per hour or three units of Y per hour, and it has 4,000 production hours available. Contribution margin is $5 for product X and $4 for product Y. 1. Calculate contribution margin per production hour.

                                                   Product X                 Product Y

Contribution Margin per                $10                            $12

Production Hour

Explanation:

The hours used in the product X and product Y is computed as:

                                                    Product X                 Product Y

Units produce in per hour                 2                                3

Hours used per units                  1/2 = 0.5                    1/3 = 0.333

The contribution margin per production hours is calculated as, divide the contribution margin by hours as shown below:

                                                     Product X                Product Y

Contribution margin                           $5                            $4

Hours used                                         0.5                         0.333

Contribution margin per              5/0.5 = 10               4/0.333 = 12

Production Hour

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