Crane Company can produce and sell only one of the following two products: Oven Contribution Hours Required Margin Per Unit Muffins 0.2 $4 Coffee Cakes 0.3 $5 The company has oven capacity of 3000 hours. How much will contribution margin be if it produces only the most profitable product?

Given:

Muffins

Contribution hours = 0.2

Margin per unit = $4

Coffee Cakes

Contribution hours = 0.3

Margin per unit = $5

Required margin per unit contribution hours, muffins = 4/0.2

= $ 20

Required margin per unit contribution hours, coffee cakes = 5/0.3

= $ 16.67

For the most profitable product, muffins = $ 20 per unit contribution hours.

At 3000 hours of oven contribution hours,

Contribution margin = $ 20 * 3000

= $ 60,000 per unit.