Please put correct answer in the underlined space provided. ABC Company manufact

Question

Please put correct answer in the underlined space provided. ABC Company manufactures water coolers and food coolers. Consider the following data for the two products: Water Coolers Food Coolers 195 $ Contribution margin per unit Machine set ups required per unit 180 12 15 There is limited capacity for machine set ups each period due to limited skilled labor and there is unlimited demand for each product. Maximum capacity for machine set ups 97,500 Required Compute the largest possible total contribution margin that can be realized each period. a) (3 Marks)

Explanation / Answer

Largest possible total contribution =97,500* 15 =1,462,500

Food coolers gives more contribution per setup. So, if we use total setup for production of food coolers, ABC company will realise large contribution

Particulars Water coolers Food coolers Contribution margin per unit $195 $180 Machine set up required per unit 15 12 Contribution margin per setup 13 15

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