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Question
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Answer
Step 1 of 2
Let's start by calculating the production capacity of the three machines during the first shift each day: 3 machines x 5 parts per hour = 15 parts per hour
Then, we can calculate the production capacity of the machines during the entire week : 15 parts per hour x 8 hours per day x 5 days per week = 600 parts per week
Expalantion
The cost of staffing and running each machine for one hour is $320, so the cost of running all three machines for one hour is: 3 machines x $320 per hour = $960 per hour
Step 2 of 2
The total cost of staffing and running the machines for eight hours a day for seven days each week is:
3 machines x $320 per hour x 8 hours per day x 7 days per week = $215,040 per week
Expalantion
If each unit sells for $1,000, then the total revenue for the 600 parts produced during the week is: 600 parts x $1,000 per part = $600,
Final Answer
The contribution margin is the difference between the total revenue and the total cost, so:
Contribution margin = Total revenue - Total cost
Contribution margin = $600,000 - $215, Contribution margin = $384, Therefore, the total contribution margin the plant can make each week by activating the trio of obsolete machines is $384,960.
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