Question

Buzz Appliances manufactures two​ products: Food Processors and Espresso Machines. The following data are​ available:

	Food Processors	Espresso Makers
Sales price	$ 165.00$165.00	$ 275.00$275.00
Variable costs	$ 60.00$60.00	$ 180.00$180.00

The company can manufacture two food processors per machine hour and three espresso machines per machine hour. The​ company's production capacity is

1 comma 6001,600

machine hours per month.

The company has demand of

1 comma 2001,200

espresso machines. How many espresso machines and food processors should they produce based on demand and available machine​ hours?

Answer 1

		Food processors	Espresso makers
	Sales price	$                       165	$        275
	Variable costs	$                         60	$        180
	Contribution margin	$                       105	$          95
	Units per machine hour	2	3
	Contribution margin per machine hour	$210	$285
	Production	2400	1200
	Workings:
(i)	Production capacity per month		1600	hours
(ii)	Production of Espresso machines		1200	units
(iii)	Units per machine hour		3	units per hour
(iv) = [(ii) / (iii)]	Production hours of Espresso machines		400	hours
(v) = [(i) - (iv)]	Remaining capacity available		1200	hours
(vi)	Units per machine hour		2	units per hour
(v) X (vi)	Production of Food processors		2400	units
	Note: Espresso makers have the higher contribution margin, therefore first it is beneficial to produce Espresso makers up their demand