CAF-5 · Chapter 15 · Question 7 of 10
Product X sells for Rs. 150 per unit and has a variable cost of Rs. 90 per unit. It takes 3 direct labour hours to produce one unit of Product X. If direct labour hours are the company's single limiting factor, what is the contribution per limiting factor for Product X?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Rs. 20 per hour
Explanation
Contribution Margin per unit = Selling Price (Rs. 150) - Variable Cost (Rs. 90) = Rs. 60. Limiting factor = 3 labour hours per unit. Contribution per limiting factor = Rs. 60 / 3 hours = Rs. 20 per hour.
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