Jonathan Inc. Is analyzing it\'s sales mix to find out if it is maximizing it\'s
ID: 2483084 • Letter: J
Question
Jonathan Inc. Is analyzing it's sales mix to find out if it is maximizing it's profits. the company produces three similar items: regular, deluxe, and luxury. all three of these products are made with the same equipment, but the machine hours available to make these products are limited. product line statistics are as follows:
current production and sales mix (units): regular 125,000, deluxe185,000, luxury 130,000
machine hours per unit: regular 14, deluxe 10, luxury 8
selling price per unit: regular $45, deluxe $55, luxury $65
unit variable cost: regular $25, deluxe $29, luxury $32
unit variable selling cost: regular $10, deluxe $12, luxury $14
provide an analysis to determine whether the existing sales mis is the most profitable one possible.
based on your analysis offer your suggestion of how to prioritize the sales mix.
Explanation / Answer
Regular
Deluxe
Luxury
Selling price per unit
$ 45.00
$ 55.00
$ 65.00
Variable cost per unit
$ 25.00
$ 29.00
$ 32.00
Variable selling cost per unit
$ 10.00
$ 12.00
$ 14.00
Contribution margin per unit
$ 10.00
$ 14.00
$ 19.00
Machine hours per unit
14
10
8
Contribution margin per unit
$ 0.71
$ 1.40
$ 2.38
Ranking
3
2
1
The current mix may not be the most profitable. On the basis of this information, Jonathan Inc. should sell as much of Luxury product as possible. Next, it should push Deluxe product. If any productive capacity remains, it should produce Regular Product.
Regular
Deluxe
Luxury
Selling price per unit
$ 45.00
$ 55.00
$ 65.00
Variable cost per unit
$ 25.00
$ 29.00
$ 32.00
Variable selling cost per unit
$ 10.00
$ 12.00
$ 14.00
Contribution margin per unit
$ 10.00
$ 14.00
$ 19.00
Machine hours per unit
14
10
8
Contribution margin per unit
$ 0.71
$ 1.40
$ 2.38
Ranking
3
2
1
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