Question

Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows: Product A Product B Product C Sales price $ 46.00 $ 56.00 $ 86.00 Variable costs per unit 22.00 12.25 38.00 Fixed costs per unit 8.00 8.00 8.00 Required number of labor hours 1.50 2.50 4.00 Cordova currently is limited to 50,000 labor hours per month. Cordova’s marketing department has determined the following demand for its products: Product A 13,000 units Product B 9,000 units Product C 5,000 units Given the company’s limited resource and expected demand, compute how many units of each product Cordova should produce to maximize its profit.

Answer 1

	A	B	C
Sales price	46	56	86
Variable costs per unit	22	12.25	38
Fixed costs per unit	8	8	8
Required number of labor hours	1.5	2.5	4
Limited	50000	hours
Product A	13000	units
Product B	9000	units
Product C	5000	units
So we have
	A	B	C
Units	13000	9000	5000
Sales	46	56	86
Varibale costs	22	12.25	38
Contribution margin	24	43.75	48
No. of hours required	1.5	2.5	4
Contruibution per hour	16	17.5	12
Ranking	II	I	III
Product	Demand	DLH/unit	DLH Available	DLH Consumed	Units Produced	DLH Remaining
B	9000	2.5	50000	22500	9000	27500
A	13000	1.5	27500	19500	13000	8000
C	5000	4	8000	8000	2000	0
Product C will be restricted to			2000	units
Cordova cannot meet full demand for Product C as there are only 8,000 DLH available. It can produce 2,000 units of Product B with the 8,000 available hours.
so production is
A	9000	UNITS
B	13000	UNITS
C	2000	UNITS