Question

Dustin Co. makes three products, A, B and C. They have a constrained resource - machine hours. There are only 17,421 machine hours available a month. The three products have the following data: A B C Selling Price per unit 6.00 16.00 11.00| Variable Cost per unit 2.00 4.00 6.00 Machine hours required Demand for product in units 1,172 3,955 1,046 4 5 How much of product B should be produced?

Answer 1

C $ 6.00 $16.00 $ 11.00 $ 2.00 $ 4.00 $ 6.00 $4.00 12.00 $5.00 Selling price per unit Variable cost per unit Contribution margin per unit Machine hours required Contribution margin per hour 2 4 $2.00 3.00 $1.00 Product B has the highest contribution margin per hour i.e $ 3. Hence, product B must be produced at maximum capacity i.e 3,955 units.