Balloon, Inc. produces three types of balloons—small, medium, and large—with the

Question

Balloon, Inc. produces three types of balloons—small, medium, and large—with the following characteristics:

The company has only 2,000 machine hours available each month.

How many units of each type of balloon should the company make to maximize its total contribution margin? (Round answers to 0 decimal places, e.g. 5,275.)

Small Medium Large Selling price per unit $8 $8 $10 Variable cost per unit 3 5 6 Contribution margin per unit $5 $3 $4 Machine hours per unit 1 2.4 3 Demand in units 590 1,040 980

Explanation / Answer

we will meet demand in order of ranking.since "small has highest contribution per hour "we will first manufacture this product and then large and last medium

since in case of large hours required = 980 *3 = 2940

But we have hours available = 1410

so we will manufacture /3 = 470 units of large

and no units of medium

Small Medium large contribution per unit   [A] 5 3 4 hours required per unit [B] 1 2.4 3 contribution per hour    [A /B] $5 $ 1.25 $ 1.33 Ranking for manufacturing 1 3 2

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