Rosie’s Company has three products, P1, P2, and P3. The maximum Rosie’s can sell is 76,000...

Rosie’s Company has three products, P1, P2, and P3. The maximum Rosie’s can sell is 76,000 units of P1, 57,000 units of P2, and 45,000 units of P3. Rosie’s has limited production capacity of 42,000 hours. It can produce 12 units of P1, 6 units of P2, and 3 units of P3 per hour. Contribution margin per unit is $5 for the P1, $15 for the P2, and $25 for the P3. What is the most profitable sales mix for Rosie’s Company?

Multiple Choice

210,000 P1, 57,000 P2, 45,000 P3.
40,500 P1, 57,000 P2, 210,000 P3.
210,000 P1, 53,000 P2, 210,000 P3.
39,900 P1, 53,000 P2, 45,000 P3.
40,500 P1, 58,000 P2, 40,500 P3.

Solutions

Expert Solution

Let us take the given scenario and calculate the profit for that:

Choice 1

Choice 2

Choice 3

Choice 4

Choice 5

As you can see, choice one utilizes the full production capacity of 42,000 hours whereas Choice 2 and Choice 3 have exceeded their production capacity. CHoice 4 & 5 have underutilized their production capacity. Considering the units produced and maximum units that can be sold, Choice 1 is the most profitable sales mix for Rosie's Company.

ekkarill92 answered 1 year ago

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