mike Glass Inc. manufactures three types of stained-glass windows, cleverly named Products A, B, and C....

mike Glass Inc. manufactures three types of stained-glass windows, cleverly named Products A, B, and C. Information about these products follows: A B C Sales price $35 $45 $75 VC/Unit 17 21 32 FC/Unit 5 5 5 Labor hours 1.25 2 2.5 Steve currently is limited to 5,000 labor hours per month. Product demand is as follows: Product A 700 Product B 500 Product C 1,500 How many, in whole numbers, of each product should Steve produce to maximize profit?

Solutions

Expert Solution

	A	B	C
Selling price per unit	35	45	75
Variable cost per unit	-17	-21	-32
Contribution margin per unit (a)	18	24	43
Labor hours per unit (b)	1.25	2	2.5
Contribution margin per labor hour (a/b)	14.4	12	17.2
Production Preferences	2	3	1

Since Contribution margin per labor hour is highest for product C, hence product C should be produced to the maximum extent.

Maximum production of product C = 1,500 units

Labor hours used in the production of product C = 1,500 x 2.5

= 3,750

Remaining labor hours = Total labor hours - Labor hours used in the production of product C

= 5,000-3,750

= 1,250

Remaining labor hours will be used to produce product A

Production of product A = Remaining labor hours/Labor hour per unit of product A

= 1,250/1.25

= 1,000

	A	B	C
Production	1,000 units		1,500 units

Kindly comment if you need further assistance.

Thanks‼!

ekkarill92 answered 1 year ago

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