Question

Q7.20: To The Point (TTP) Manufacturers produces two types of chef's knives. The standard knife, which sells for $100 takes 6 minutes on the honing machine, while the deluxe knife takes 10 minutes on the machine and sells for $150. Variable costs are $40 for standard; $90 for deluxe. TTP production is limited by the honing machine, which is available for 40 hours each week. If TTP can increase its honing machine capacity by 20 hours per week where should they focus their production efforts? Since both models have the same contribution margin, the hours should be divided equally: 10 hours to standard and 10 hours to deluxe. Since the deluxe model has the highest price, it should be produced first until demand is met; and if any time remains then the standard model would be produced. c If there is enough demand, then TTP should focus all their efforts on the standard model. D If there is enough demand, then TTP should focus all their efforts on the deluxe model.

Answer 1

Calculation of Contribution per Standard Korife and deluxe hour for korife Deluxe Korife $150 Standard Korife $100 - $30_ $60 $ 90 $60 Selling Price less: Variable wot Costes bulio - time required (in onionutes) Contribution fer - ominutes beninutes toonistes $10 $6. Recommendation - As contributions per minutes is higher is for 'Otandard Knige oorgehould focus all their efforts on the I estandard blockey 1 Arswer (6)