Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,910 units of Product TLX and 4,298 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. $ per unitProduct TLXProduct MTVSelling price per unit $11.50 $6.90 Variable costs per unit 3.45 4.14 Product TLXProduct MTV Contribution margin per unit Contribution margin per production hour Product TLXProduct MTVTotalMaximum number of units to be sold3,9104,298 Hours required to produce maximum units For Most Profitable Sales MixProduct TLXProduct MTVTotalHours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin

Contribution refers to earnings left after deducting all direct costs from the sales revenue. It is…

Answered: Colt Company owns a machine that can…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 16E

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Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,300 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,910 units of Product TLX and 4,298 units of Product MTV. Selling prices and variable costs per unit to produce the products follow.

$ per unit	Product TLX	Product MTV
Selling price per unit		$	11.50	$	6.90
Variable costs per unit			3.45		4.14


	Product TLX	Product MTV
Contribution margin per unit

Contribution margin per production hour

	Product TLX	Product MTV	Total
Maximum number of units to be sold	3,910	4,298
Hours required to produce maximum units

For Most Profitable Sales Mix	Product TLX	Product MTV	Total
Hours dedicated to the production of each product

Units produced for most profitable sales mix
Contribution margin per unit
Total contribution margin

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