Question

Buzz Appliances manufactures two​ products: Food Processors and Espresso Machines. The following data are​ available:

	Food Processors	Espresso Makers
Sales price	$ 155.00$155.00	$ 245.00$245.00
Variable costs	$ 70.00$70.00	$ 170.00$170.00

The company can manufacture two food processors per machine hour and three espresso machines per machine hour. The​ company's production capacity is

1 comma 7001,700

machine hours per month.The company has demand of

2 comma 1002,100

espresso machines. How many espresso machines and food processors should they produce based on demand and available machine​ hours?

A.

700700

espresso machines and

2 comma 0002,000

food processors

B.

2 comma 1002,100

espresso machines and

1 comma 0001,000

food processors

C.

700700

espresso machines and

1 comma 0001,000

food processors

D.

2 comma 1002,100

espresso machines and 0 food processors

Answer 1

Answer is 2 comma 1002,100 espresso machines and 0 food processors.

Explanation:

Contribution per unit of Food Processor = Sales price - Variable costs = $155 - $70 = $85

Contribution per unit of Espresso Makers = Sales price - Variable costs = $245 - $170 = $75

Contribution per machine hour if Food Processor is manufactured = $85*2 = $170

Contribution per machine hour if Espresso Makers is manufactured = $75*3 = $225

Contribution margin per machine hour in case of manufacturing Espresso Makers is higher in comparison to Food Processor, so, Espresso Makers should be manufactured till the demand for Espresso Makers is satisfied and there after Food Processor should be manufactured with the remaining machine hours available.

Total demand for Espresso Makers = 2100

Machine hours available = 1700

Machine hours utilized in total manufacturing of Espresso Makers =

Total demand for Espresso Makers/Number of Espresso Makers manufactured per machine hour

= 2100/3 = 700 machine hours

Remaining machine hours = 1700 - 700 = 1000

Remaining machine hours is 1000 but there is no demand for Food Processor available in the market. So, company should manufacture 2,100 espresso machines and 0 food processors.