Exercise 9- Limited/Scarce Resource Bakery, Inc produces four different types of
ID: 2476676 • Letter: E
Question
Exercise 9- Limited/Scarce Resource
Bakery, Inc produces four different types of baked goods. Each one requires a different amount of baking time in the oven. There are eight baking hours in a day.
1 2 3 4
Selling price $6 $10 $15 $35
VC $2 $4 $8 $20
CM $4 $5 $7 $15
Baking time (minutes) 10 15 20 50
# of units they can sell per day 15 12 8 8
Required: Which item should you make first? How many of each item should you make? Is there any item that you will not make?
Please slove.
Explanation / Answer
Particulars
1
2
3
4
Selling Price
6
10
15
35
VC
2
4
8
20
CM per unit
4
6
7
15
Baking time( in minutes)
10
15
20
50
CM per minute
0.40
0.40
0.35
0.30
Rank
I
I
II
III
Total time Required to bake all items to bake
Item
No of units
Time per Unit
Total Time( in minutes)
1
15
10
150
2
12
15
180
3
8
20
160
4
8
50
400
890
Total Time available In Minutes 8 hours x 60
480 minutes
Less : Time to bake 12 units of item no.2
180
Balance available time
300
Less : Time to bake 15 units of item no.1
150
Balance available time
150
Less : Time to bake 7 units of item no.3
140
Balance available time
10
We should make item 2 first. Though contribution of Item 1 and 2 same, contribution per unit of Item 2 is more.
We should make 12 units. of item 2 ,15 units of item 1 and 7 unit of item 3.
Balance time 10 minutes is not sufficient to make any units of item 3 & 4.
We will not make item 4.
Particulars
1
2
3
4
Selling Price
6
10
15
35
VC
2
4
8
20
CM per unit
4
6
7
15
Baking time( in minutes)
10
15
20
50
CM per minute
0.40
0.40
0.35
0.30
Rank
I
I
II
III
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