Montgomery Company Produces a and B with Contribution Margins Per

question 55

Multiple Choice

Montgomery Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labor hours and 300 machine hours are available for production. Time requirements to produce one unit of A and B are as follows: $\begin{array}{lcc} & \text { Product A } & \text { Product B } \\\text { Labor hours per unit } & 6 & 3 \\\text { Machine hours per unit } & 2 & 5\end{array}$
What is the constraint on machine hours for Montgomery Company?

• A)2A + 5B ? 500
• B)2A + 5B ? 300
• C)6A + 3B ? 500
• D)40A + 30B ? 500

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Definitions:

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of the investee's profits or losses.

Journal Entries

The basic way to record financial transactions in double-entry bookkeeping, involving debits and credits in accounting records.

Dividends

Disbursements issued by a company to its shareholders, typically originating from the firm's earnings.

Fair Value Through Profit or Loss

An accounting approach where financial assets are recorded at their fair value, with changes affecting the profit or loss statement directly.