Cordove manufactures three types of stained glass window, cleverty named Product
ID: 2555518 • Letter: C
Question
Cordove manufactures three types of stained glass window, cleverty named Products A, B, and C Information about these products follows B Product C Sales price Variable costs per unit Fixed costs per unit Roquired number of labor hours Product A $36.00 18.50 4.00 1.25 Product 8 66.00 21.00 4.00 2.00 76.00 38.50 4.00 2.50 Cordova currently ?shmited to 38,500 labor hours per month. Cordova's marketing department has determined the folowing demand for its products Product A Product B Product C 10,000 units 12,000 units 4,000 units Required: Given the company's limited resource and expected demand, compute how many units of each product Cordova should produce to maximize its profit. (Enter the products in the sequence of their preferences; the product with first preference should be entered first. Round your answer to the nearest whole number.)Explanation / Answer
a. Ranking of product on the basis of contribution margin per labor hour Product A Product B Product C Sales Price $ 36.00 $ 46.00 $ 76.00 Variable cost per unit $ 18.50 $ 21.00 $ 38.50 Contribution Margin per unit $ 17.50 $ 25.00 $ 37.50 Labor hours per unit 1.25 2.00 2.50 Contribution Margin per labor hour $ 14.00 $ 12.50 $ 15.00 Preference II III I Because labor hours are limited resource, so each product is evaluated on the basis of labor hour. b. Schedule of production on the basis of labor hours: Beginning Balance Units to be produced Labor hours per unit Total Labor hours used Ending Balance of labor hours of Labor hours Product C 38,500 4,000 2.50 10,000 28,500 Product A 28,500 10,000 1.25 12,500 16,000 Product B 16,000 8,000 (Balancing) 2.00 16,000 0 Production of each product : Product Units produced C 4,000 A 10,000 B 8,000
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