Question
In: Accounting
Consider the following production and cost data for two products, Avery and Jack: Product Avery Contribution...
Consider the following production and cost data for two products, Avery and Jack:
Product Avery
Contribution margin per unit $98
Machine minutes needed per unit 7.5 minutes
Current demand for product 3,000 minutes
Product Jack
Contribution margin per unit $124
Machine minutes needed per unit 10 minutes
Current demand for product 3,000 units
A total of 37,500 machine minutes are available each period. What is the largest possible total contribution margin that can be realized each period?
Solutions
Expert Solution
Limited factor = 37,500 machine minutes
|
. |
Avery |
Jack |
|
Contribution margin per unit |
$98 |
$124 |
|
Machine minutes needed per unit |
7.5 mints |
10 mints |
|
Contribution margin per Machine mints |
98/7.5 = 13.07 |
124/10 = 12.4 |
|
Current demand for product |
3,000 |
3,000 |
Highest contribution margin per machine mints from Product Avery, so first preference to this product and produce maximum of 3000 units
Machine mints used by Product Avery to produce 3000 units = 3000 * 7.5 = 22500 mints
Remaining mints are used for product jack
Available mints = 37500 - 22500 = 15000 mints
Using 15000 mints, Product Jack can produce = 15000 / 10 = 1500 units
So, here largest possible total contribution margin that can be realized each period is:
Producing 3000 units of product Avery and 1500 units of Product Jack by realizing contribution margin
|
. |
Avery |
Jack |
|
Units |
3000 |
1500 |
|
contribution margin per units |
98 |
124 |
|
Total contribution margin from each |
$294000 |
$186000 |
Maximum contribution margin total = $294000 + $186000 = $480000
ekkarill92 answered 1 year agoRelated Solutions
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