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Business
AccountingManagerial Accounting: The Cornerstone of Business Decision-Making7th Edition

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Chapter 8, Problem 32BEB
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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

Solutions

Chapter
Section
Problem 1DQ
Problem 2DQ
Problem 3DQ
Problem 4DQ
Problem 5DQ
Problem 6DQ
Problem 7DQ
Problem 8DQ
Problem 9DQ
Problem 10DQ
Problem 11DQ
Problem 12DQ
Problem 13DQ
Problem 1MCQ
Problem 2MCQ
Problem 3MCQ
Problem 4MCQ
Problem 5MCQ
Problem 6MCQ
Problem 7MCQ
Problem 8MCQ
Problem 9MCQ
Problem 10MCQ
Problem 11MCQ
Problem 12MCQ
Problem 13MCQ
Problem 14MCQ
Problem 15MCQ
Problem 16BEA
Problem 17BEA
Problem 18BEA
Problem 19BEA
Problem 20BEA
Problem 21BEA
Problem 22BEA
Problem 23BEA
Problem 24BEA
Problem 25BEA
Problem 26BEB
Problem 27BEB
Problem 28BEB
Problem 29BEB
Problem 30BEB
Problem 31BEB
Problem 32BEB
Problem 33BEB
Problem 34BEB
Problem 35BEB
Problem 36E
Problem 37E
Problem 38E
Problem 39E
Problem 40E
Problem 41E
Problem 42E
Problem 43E
Problem 44E
Problem 45E
Problem 46E
Problem 47E
Problem 48E
Problem 49E
Problem 50E
Problem 51E
Problem 52E
Problem 53E
Problem 54P
Problem 55P
Problem 56P
Problem 57P
Problem 58P
Problem 59P
Problem 60P
Problem 61P
Problem 62P
Problem 63P
Problem 64P
Problem 65P
Problem 66P
Problem 67P
Problem 68C
Problem 69C
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Use the following information for Brief Exercises 8-32 and 8-33:

Relax Spas provides two types of massage services, the Full Body and the Trouble Spots, with unit contribution margins of $198 and $90, respectively. Regardless of type, each massage requires the use of a certified masseuse. Relax Spas has four masseuses on staff who each work 1,500 hours per year. Each Full Body massage uses 90 minutes of masseuse time, and each Trouble Spot massage uses 30 minutes of masseuse time. [Note: For all answers that are less than 1.0, round the answer to two decimal places. For all unit answers (e.g., the answer is greater than 1.0), round the answer to the nearest whole number.]

Determining the Optimal Product Mix with One Constrained Resource

Refer to the information for Relax Spas above. Assume that there are no other constraints.

Required:

  1. 1. What is the contribution margin per hour of masseuse time for each type of massage?
  2. 2. What is the optimal mix of massages?
  3. 3. What is the total contribution margin earned for the optimal mix?

1.

To determine

Calculate the contribution margin per hour of masseuse time for each type of massage.

Explanation

Contribution Margin:

Contribution margin can be defined as the amount obtained after deducting variable expense from sales revenue. It means the amount of sales left after covering the variable expenses.

The following table represents the contribution margin per hour of masseuse time for each type of massage:

 Full body ($)Trouble Spots ($)
Contribution margin per unit19890
Required masseuse time per massage11.500.5
Contribution margin per hour of masseuse time2132180

Table (1)

Therefore, the contribution margin per hour of masseuse time for full body and trouble spot are $132 and $180 respectively.

Working Notes:

1. Calculation of required masseuse time per massage for the full body:

Required masseuse time=Time required in full body massageNumber of minutes in an hour=90 minutes60minutes=1.5 hours

Hence, the required masseuse time per massage for the full body is 1.50 hours.

Calculation of required masseuse time per massage for trouble spots:

Required masseuse time=Time required in trouble spot massageNumber of minutes in an hour=30 minutes60 minutes=0

2.

To determine

Calculate the optimal mix of the massages.

3.

To determine

Calculate the contribution margin earned for the optimal mix.

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