Question
In: Accounting
AHH! Corporation has three product lines with limited demand. The firm has NO fixed costs. Below...
AHH! Corporation has three product lines with limited demand. The firm has NO fixed costs. Below are some facts about the firm. Oh! No! Way! Monthly demand (units) 100 120 140 Machine hours per unit 3 6 8 Price per unit $70 $75 $80 Variable costs per unit $60 $62 $60 The firm can only supply 1,800 hours of machine time per month between the three product lines. What is the firm's maximum monthly profit? Selected Answer: c. $4,300 Answers: a. $5,560 b. $4,510 c. $4,300 d. $4,650
Solutions
Expert Solution
Correct answer-------$4,650
The answer by the given below calculation is $4,623 which is closest to Option d
Working
| Statement of ranking indicating which product to produced first, second and third | |||
| Product | |||
| Oh | No | Way | |
| Sales price per unit | $ 70.00 | $ 75.00 | $ 80.00 |
| Variable cost per unit | $ 60.00 | $ 62.00 | $ 60.00 |
| Contribution margin per unit | $ 10.00 | $ 13.00 | $ 20.00 |
| Machine hours per unit | 3.00 | 6.00 | 8.00 |
| Contribution margin per machine hour | $ 3.33 | $ 2.17 | $ 2.50 |
| Ranking | I | III | II |
| Statement of Optimum mix | |||
| Product | Units to be Produced | Machine hours per unit | Machine hours consumed |
| Oh | 100 | 3.00 | 300.00 |
| No | 63 | 6.00 | 380.00 |
| Way | 140 | 8.00 | 1120.00 |
| Maximum Quantity | 1800.00 | ||
| Units | Contribution per unit | Total Contribution | |
| Oh | 100.00 | $ 10.00 | $ 1,000 |
| No | 63.33 | $ 13.00 | $ 823 |
| Way | 140.00 | $ 20.00 | $ 2,800 |
| Total | $ 4,623 | ||
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