Question

Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine’s capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,910 units of Product TLX and 2,085 units of Product MTV. Selling prices and variable costs per unit to produce the products follow.

$ per unit	Product TLX				Product MTV
Selling price per unit		$	13.50			$	8.10
Variable costs per unit			4.05				4.86

Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round per unit contribution margins to 2 decimal places.)

Product TLX Product MTV Contribution margin per unit Contribution margin per production hour Product TLX Product MTV Total Maximum number of units to be sold 3,910 2,085 Hours required to produce maximum units For Most Profitable Sales Mix Product TLX Product MTV Total Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin

Answer 1

Answer:

	Product TLX	Product MTV
Contribution margin per unit	$          9.45	$            3.24
Contribution margin per production hour	$          4.73	$            0.65
	Product TLX	Product MTV	Total
Maximum number of units to be sold	3,910	2,085
Hours required to produce maximum units	7,820.00	10,425.00	18,245.00
For Most Profitable Sales Mix	Product TLX	Product MTV	Total
Hours dedicated to the production of each product	2,300.00	-	2,300.00
Units produced for most profitable sales mix	1,150.00	-	1,150.00
Contribution margin per unit	$          9.45	$                -
Total contribution margin	$ 10,867.50	$                -	$ 10,867.50

Note:

	Product TLX	Product MTV
Selling price	$       13.50	$            8.10
Variable Cost	$          4.05	$            4.86
Contribution per unit	$          9.45	$            3.24
Number of hours per unit	2.00	5.00
Contribution per hour	$          4.73	$            0.65

In case of any doubt, please comment.