eBook Calculator Print item Choosing the Optimal Product Mix with One Constraine

Question

eBook Calculator Print item Choosing the Optimal Product Mix with One Constrained Resource Bilings Company produces two products, Product Reno and Product Tahoe. Each product ooes through ts own assembly and finishing per year. Product Reno has a unit contribution margin of $ 120 and requires five hours of painting department time. Producd departments. However, both of them must go through the painting department. The painting department h as capacty of 1,670 hours a unit contribution margin of $52 and requires two hours of painting department time. There are no other constraints Required: 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 "o Optimal Mix units Reno Tahoe 3. What is the total contribution margin earned for the optimal mix? units

Explanation / Answer

Answer 1.

Product Reno:

Unit Contribution Margin = $120
Required hours of painting department = 5

Contribution Margin per hour of painting department = Unit Contribution Margin / Required hours of painting department
Contribution Margin per hour of painting department = $120 / 5
Contribution Margin per hour of painting department = $24

Product Tahoe:

Unit Contribution Margin = $52
Required hours of painting department = 2

Contribution Margin per hour of painting department = Unit Contribution Margin / Required hours of painting department
Contribution Margin per hour of painting department = $52 / 2
Contribution Margin per hour of painting department = $26

Answer 2.

Company will use all the available hours of painting department to produce Tahoe

So, Company will produce 835 units (1,670 hours / 2 hours per unit)

Answer 3.

Total Contribution Margin = 835 units * $52 per unit
Total Contribution Margin = $43,420

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.