Rango Company produces two models of seats, Toro and Prep. Information regarding
ID: 2623054 • Letter: R
Question
Rango Company produces two models of seats, Toro and Prep. Information regarding these products for May follows:
Toro
Prep
Number of units
3,000
7,000
Sales revenue
$120,000
$140,000
Variable costs
60,000
42,000
Fixed costs
24,000
50,000
Net Income
$36,000
$48,000
Pounds of plastic to produce one bucket
4.0
1.6
Contribution margin per unit
$20
$14
Due to increased demand of plastic in the market, Rango Company can obtain only 9,000 pounds of plastic per month. Rango can sell as many seats as it can produce of either model. How many of each model should Rango produce to maximize profit in May considering the constraint?
A)
Toro: 0; Prep: 4,375
B)
Toro: 2,250; Prep: 0
C)
Toro: 1,125; Prep: 2,812
D)
Toro: 0; Prep: 5,625
Rango Company produces two models of seats, Toro and Prep. Information regarding these products for May follows:
Toro
Prep
Number of units
3,000
7,000
Sales revenue
$120,000
$140,000
Variable costs
60,000
42,000
Fixed costs
24,000
50,000
Net Income
$36,000
$48,000
Pounds of plastic to produce one bucket
4.0
1.6
Contribution margin per unit
$20
$14
Due to increased demand of plastic in the market, Rango Company can obtain only 9,000 pounds of plastic per month. Rango can sell as many seats as it can produce of either model. How many of each model should Rango produce to maximize profit in May considering the constraint?
A)
Toro: 0; Prep: 4,375
B)
Toro: 2,250; Prep: 0
C)
Toro: 1,125; Prep: 2,812
D)
Toro: 0; Prep: 5,625
Explanation / Answer
D)
Toro: 0; Prep: 5,625
Per pound profit for
Toro: 36000/4 = 9000
Prep: 48000/1.6 = 30000
Hence, all available plastic should be used to produced Prep.
No of units produced = total plastic available/ plastic required for 1 unit of Prep
= 9000/1.6
= 5625
D)
Toro: 0; Prep: 5,625
Per pound profit for
Toro: 36000/4 = 9000
Prep: 48000/1.6 = 30000
Hence, all available plastic should be used to produced Prep.
No of units produced = total plastic available/ plastic required for 1 unit of Prep
= 9000/1.6
= 5625
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