Murphy’s, Inc. has the following production and cost data for two of its product

Question

Murphy’s, Inc. has the following production and cost data for two of its products, Standard and Deluxe:

Standard Deluxe

Contribution margin per unit $54.54 $35.01

Machine hours needed per unit 1.80 0.90

A total of 83,000 hours is available each period for the production of the two products. The demand for both products is strong and Murphy will be able to sell as many of either product as it can produce. Ignoring qualitative issues, which of the two products should Murphy produce?

(Round answers to 2 decimal places, e.g. 1.64.)

Standard Deluxe

Contribution margin per constraint ________ _________

Explanation / Answer

Standard Deluxe Machine Hour available 83000 83000 Machine hour needed for per Unit 1.8 0.9 total Units produced 46111.11 92222.22 Contribution margin per unit 54.44 35.01 Total contribution Margin 2510289 3228700 Ecxess 718411.1 Deluxe Product is having excess contribution margin of 718411 over standard so deluxe product should be purchased.

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