Question

Bricktan Inc. makes three products, basic, classic, and deluxe. The maximum Bricktan can sell is 715,000 units of basic, 420,000 units of classic, and 120,000 units of deluxe. Bricktan has limited production capacity of 90,000 hours. It can produce 10 units of basic, 8 units of classic, and 4 units of deluxe per hour. Contribution margin per unit is $15 for the basic, $25 for the classic, and $55 for the deluxe. What is the most profitable sales mix for Bricktan Inc.? 1

A. 50,000 basic, 120,000 classic and 240,000 deluxe.

B. 75,000 basic, 420,000 classic and 120,000 deluxe.

C. 600,000 basic, 0 classic and 120,000 deluxe.

D. 71,500 basic, 420,000 classic and 240,000 deluxe.

E. 300,000 basic, 240,000 classic and 120,000 deluxe.

Answer 1

Correct option is: B. 75,000 Basic, 420,000 Classic and 120,000 Deluxe
Workings:
	Basic	Classic	Deluxe
Contribution margin per unit	$                    15	$                    25	$                 55
Production units per hour	10	8	4
Contribution margin per production hour	$                  150	$                  200	$               220
Order	III	II	I
	Basic	Classic	Deluxe	Total
Maximum number of units to be sold	7,15,000	4,20,000	1,20,000	12,55,000
Hours required to produce the maximum units	71,500	52,500	30,000	1,54,000
For most profitable sales mix	Basic	Classic	Deluxe	Total
Hours dedicated to the production of each product	7,500	52,500	30,000	90,000
Units produced for most profitable sales mix	75,000	4,20,000	1,20,000