Choosing the Optimal Product Mix with One Constrained Resource Billings Company

Question

Choosing the Optimal Product Mix with One Constrained Resource Billings Company produces two products, Product Reno and Product Tahoe. Each product goes through its own assembly and finishing departments. However, both of them must go through the painting department. The painting department has capacity of 2 004 hours per year. Product Reno has a unit Dontributi n magin 100 and requi es our hours o painting d partment tine. Product Tahi e has a unit contribution mar i o 78 ?? requi s three hours of painting department time. There are no other constraints. Required: 1. What is the contribution margin per hour of painting department time for each product? Contribution Margin Reno Tahoe 2. What is the optimal mix of products? If an amount is zero,enter 0 Optimal Mix Reno Tahoe 3. What is the total ontribution margi units units eaned for the optimal mix?

Explanation / Answer

1 Contribution margin per hour Reno 25 =100/4 Tahoe 26 =78/3 2 Optimal mix Reno 0 Tahoe 668 =2004/3 3 Total contribution margin=668*78= $52104

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