Question 17 (1 point) [Question 17 Unsaved] Delfi Company produces two models of

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Question 17 (1 point)

[Question 17 Unsaved]

Delfi 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, Delfi Company can obtain only 9,000 pounds of plastic per month. Delfi can sell as many seats as it can produce of either model. How many of each model should Delfi produce to maximize profit in May considering the constraint?

Question 17 options:

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

First find Contribution margin per pound of plastic:

Toro: 20/4.0 = $5 per pound

Prep: $14/1.6 = $8.75 per pound

Since Prep has a higher contribution per pound of plastic, they should make as many Preps as they can.

9,000 pound/1.6 pounds per unit = 5625 units of Prep

Answer: D. Toro: 0; Prep: 5,625

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