Question

A company sells two products with information as follows: Sales price per unit Variable cost per unit А $11 $10 $20 $10 The products are machine made. Four units of product A can be made with one machine hour, and two units of product B can be made with one machine hour. The company has a maximum of 5,000 machine hours available per month. The company can sell up to 17,000 units of product A per month and up to 3,000 units of product B for the month. What is the maximum amount of contribution margin that the company could earn in a month given the stated constraints? O A. $14,000 O B. $30,000 C. $44,000 OD. $17,000

I'm uncertain to how to about calculating the maximum contribution margin that could be earned. Any help will be greatly appreciated.

Answer 1

Sno 11.00 Ranking Particulars 1 Selling Price per unit 2 Variable cost per unit 3 Contribution margin per unit 4 Machine hours required per unit[1/4;1/2] 1.00 10.00 5 Contribution margin per unit/Machine hours required per unit(3/4) 7 Ranking(1,e first Produce product B) B Total 5000 0.25 0.5 Optimum sales Mix Sno Particulars 1 Total Machine hours available 2 Direct labour hours required per unit Machine hours required First Allocate machine hrs to B l,e 3000/2=1500 hrs required to produce 3000 units of Product B after that Balance avalilabe Hours 1, e 5000-1500=3500 Hrs shall be allocated 3 to Product A 4 No:of units per Mchine hour 5 No: Of units Produced (4*3) 3500 1500 5000 14000 3000

B Total A 14000 Contribution margin at optimum sales mix Sno Particulars No: Of units 2 Selling Price per unit 3 Variable cost per unit 4 Contribution per unit(2-3) 5 Contribution (1*4) 11.00 3000 20.00 10.00 10.00 1.00 14000 20 30000 44000