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 3,360 hours per year. Product Reno has a unit contribution margin of $115 and requires five hours of painting department time. Product Tahoe has a unit contribution margin of $96 and requires four 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 23 Reno Tahoe 2. what is the optimal mix of products? If an amount is zero, enter"0". 24 Optimal Mix o units Reno Tahoe 3. What is the total contribution margin earned for the optimal mix? 1,680 X units 161,280 X Feedback Check My Work 1. Divide the contribution margin for each product by painting department hours. 2. Determine the first priority to meet market demands. 3. Calculate CM based on mix of products determined.

Explanation / Answer

2 Reno 0 Tahoe 840 =3360/4 3 Total contribution margin = 840*96= $80640

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