Unit contribution margin

Purchase of Manufacture of Manufacture of

tackleboxes tackleboxes Skateboards
Selling Price $ 86.00 $ 86.00 $ 45.00
Direct Labor $ -18.75 $ -7.50
Material $ -68.00 $ -17.00 $ -12.50
Manufacturing OH $ -6.25 $ -2.50
Selling & Admin Costs $ -4.00 $ -11.00 $ -3.00
Contribution Margin $ 14.00 $ 33.00 $ 19.50
Direct Labor hours $ 1.25 $ 0.50
Contribution per hour $ 26.40 $ 39.00

Tackle boxes:
Direct-labor hours $ 18.75 15 $ 1.25
Overhead per hour $ 12.50 1.25 $ 10.00
Capacity 8000 1.25 10000 Hours
Total OH $ 10.00 /hr $ 100,000
Total V.OH 50000
V.OH / hour 5 /hr
V.OH / box $ 6.25
Skateboards:
Direct Labor hours 7.5 15 0.5 hours
V.OH 2.5

Since the total capacity is 10,000 hours we need to complete skateboards & Tackleboxes within this capacity
1.25 Tackleboxes + 0.5 Skateboards <= 10,000 hrs
No. ok skateboards required = 17,500
1.25*x + 0.5*17500 = 10,000
Therefore, x = 1000
Tackleboxes need to manufacture = 1000 boxes
ackleboxes within this capacity
 Direct
Direct Labour Unit
Items Qty Labour
Hour / unit Contribution
Hour
Total hours 10,000
Skateboards 17,500 0.5 8,750 $ 19.50
Manufactured tackle boxes 1,000 1.25 1,250 $ 33.00
Purchased tackle boxes 9,000 $ 14.00
Total Contribution

8000 tackleboxes are manufactured by sportsway annually

Therefore the cost is 8,000 x $33 = $ 264,000.00
Improvement in contribution margin is: $ 236,250.00
 Total item
Contribution

$ 341,250.00
$ 33,000.00
$ 126,000.00
$ 500,250.00