Question

Murphy’s, Inc. has the following production and cost data for two of its products, Standard and Deluxe:

		Standard		Deluxe
Contribution margin per unit		$67.62		$37.30
Machine hours needed per unit		2.10		1.00

A total of 80,000 hours is available each period for the production of the two products. The demand for both products is strong and Murphy will be able to sell as many of either product as it can produce. Ignoring qualitative issues, which of the two products should Murphy produce?

(Round answers to 2 decimal places, e.g. 1.64.)

		Standard		Deluxe
Contribution margin per constraint		$		$

Murphy should produce the                                                           DeluxeStandard product.

Answer 1

			Standard	Deluxe
	Contribution Margin/Unit		$67.62	$37.30
	Machine Hours		2.10	1.00
	Total Hours		80,000.00
	Units to be produce		38,095	80,000
	total contribution		2,576,000	2,984,000
	Murphy should produce deluxe - 80000 units.