Edda\'s Inc. is a producer of frozen pizza products. The company sells two kinds

Question

Edda's Inc. is a producer of frozen pizza products. The company sells two kinds of pizzas: Regular and Deluxe. Regular sells for $10 and cost $6 to produce, and Deluxe $18 and $8, respectively. Each week the firm has 70 pounds of dough mix, 25 pounds of topping mix, and $320 in its budget for producing both pizzas. Each Regular pizza uses 1 pound of dough mix and 4 ounces (16 ounces= 1 pound) of topping mix. Each Deluxe pizza uses 1 pound of dough mix and 6 ounces of topping mix. Based on past demand, Edda can sell at least 60 Regular pizzas and at least 25 Deluxe pizzas, each week. The problem is to determine the number of Regular and Deluxe pizzas the company should make to maximize net income.

Explanation / Answer

Contribution margin of regular pizza per dough mix = (10-6)/1= $4

Contribution margin of regular pizza per topping mix = (10-6)/(4/16)= $16

Contribution margin of Delux pizza per dough mix = (18-8)/1= $10

Contribution margin of Delux pizza per topping mix =(18-8/(6/16)= $26.67

Therefore Edda's Inc.should produce maximum Deluxe pizaa

Maximum delux pizza that should be produced = 70

Cost of 70 delux pizza = 8*70 = $560

The budget is only #320

Maximum delux pizza that can be produced = 320/8 = 40

number of Regular pizzas = 0

number of Deluxe pizzas = 40

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