Question

Rough Stuff makes 2 products: khaki shorts and khaki pants for men. Each product passes through the cutting machine area, which is the chief constraint during production. Khaki shorts take 15 minutes on the cutting machine and have a contribution margin per pair of shorts of $14. Khaki pants take 24 minutes on the cutting machine and have a contribution margin per pair of pants of $28. If it is assumed that Rough Stuff has 4,800 hours available on the cutting machine to service a minimum demand for each product of 3,000 units, how much will profits increase if 80 more hours of machine time can be obtained?

Answer 1

	Khaki Shorts	Khaki Pants
Contribution Margin per unit	14	28
Minutes Required	15	24
Contribution Margin per minute of cutting	0.93	1.17
Contribution per Hour ( per min * 60 )	56	70
Rank	2nd	1st
From Extra 80 Hours only Khaki Pants will be processed as these have higher Contribution Margin per hour
Increase in Profit
( 80 Hours * $ 70 per Hour )	5600
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