# Determine the contribution margin per unit for each type of vase.

Rose Incorporate manufactures two kinds of vases: small and large.

a. You can calculate the contribution margin for each style of vase by subtracting variable costs (e.g. material and labor) and then multiplying by the amount of units manufactured:

Contribution Margin Per Unit = Total Sales – Variable Costs/Units Produced

Rose Incorporated would sell 100 Style A units at \$10 each, and there is \$4 material cost, \$2 labor cost, for \$6 total variable cost. The contribution margin would then be \$4.
Total Sales = 100 x 10 = 1000; Variable Cost 6×100=\$600; Contribution Margin=1000-600/100=\$4
b. For each style of vase, the contribution margin per hour is calculated by taking part A’s contribution margin and subtracting it from the time required to create one unit. If it takes you 0.5 hours to make one Style A vase (with a contribution margin of 4\$),:

The Contribution Margin per Machine Hour =Contribution Margin/Hours Required to Produce 1 Unit=(4/0.5)=8\$

Rose Incorporated needs to produce as many units in a given time as possible while making sure they have enough resources to pay labor and materials costs (e.g. not overproducing). This can either be achieved using linear programming, or another optimization method depending on the constraints like availability of material shifts and so forth.

d. The dollar amount of maximum operating income will depend on how many units are actually produced during this period but in general will equal: Maximum Operating Income=Total Sales – Total Fixed Costs – Total Variable Costs

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