Response:
$8,000
Clarification:
khaki shorts khaki pants
machine minutes per unit 15 24
contribution margin per unit $16 $32
CM per machine minute $1.067 $1.33
minimum demand 3,000 3,000
machine minutes required 45,000 72,000
total machine minutes available 288,000
total machine minutes remaining 171,000
production 0 7,125
total production 3,000 10,125
total contribution margin $48,000 $324,000
adding 100 more machine hours will elevate production time by 6,000 minutes, enabling the creation of an additional 250 khaki pants. Thus, the contribution margin increases by 250 x $32 = $8,000
I calculated contribution margin per minute; alternatively, contributing margin per hour could also be computed to identify which product yields better profitability. Contribution margin per hour for shorts = $64, and for pants = $80. The outcome remains unchanged.
