Question
In: Accounting
Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information...
Cordova manufactures three types of stained glass window,
cleverly named Products A, B, and C. Information about these
products follows:
| Product A | Product B | Product C | |||||
| Sales price | $ | 54.00 | $ | 64.00 | $ | 94.00 | |
| Variable costs per unit | 18.80 | 10.25 | 26.80 | ||||
| Fixed costs per unit | 4.00 | 4.00 | 4.00 | ||||
| Required number of labor hours | 2.00 | 2.50 | 4.00 | ||||
Cordova currently is limited to 60,000 labor hours per month.
Cordova’s marketing department has determined the following demand
for its products:
| Product A | 14,000 | units | |
| Product B | 10,000 | units | |
| Product C | 6,000 | units | |
Required:
Given the company’s limited resource and expected demand, compute
how many units of each product Cordova should produce to maximize
its profit. (Enter the products in the sequence of their
preferences; the product with first preference should be entered
first. Round your answers to the nearest whole
number.)
|
Solutions
Expert Solution
| Products | A | B | C | |||||
| Sales Price | 54.00 | 64.00 | 94.00 | |||||
| Less: Variable Expense | 18.80 | 10.25 | 26.80 | |||||
| Contribution Margin | 35.20 | 53.75 | 67.20 | |||||
| Direct Labor Hours | 2.00 | 2.50 | 4.00 | |||||
| Contribution Margin Per DLH | 17.60 | 21.50 | 16.80 | |||||
| Ranking | II | I | III | |||||
| Products | Ranking | Direct Labor Hours | Units Produced | Total DLHs | ||||
| A | II | 2.00 | 14,000 | 28,000 | Entire Production basis Ranking | |||
| B | I | 2.50 | 10,000 | 25,000 | Entire Production basis Ranking | |||
| C | III | 4.00 | 1,750 | 7,000 | Balance Resources post A & B (60000-28000-25000) | |||
| (7000/4) | 60,000 | |||||||
| Products | ||||||||
| A | 14,000 | |||||||
| B | 10,000 | |||||||
| C | 1,750 | |||||||
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