The company Color World manufactures three products that require the use of a special machine. There are only 20,000 machine hours available per month. Product information: Product A Product B Product C Sales price per unit $ 1,200.00 $ 1,600.00 $ 2,100.00 Variable costs per unit $ 700.00 $ 800.00 $ 1,000.00 Contribution margin per unit $ 500.00 $ 800.00 $ 1,100.00 Machine Time required (hours) 10/unit 20/unit 25/unit Estimated demand in units (per month) 500 1000 400 a) If all products require the same amount of machine-time and you can sell any amount of any product, which one should be manufactured to maximize profits? b) With the estimated demand, the machine-time restriction and the time required for each product, determine the optimal composition that should be sold of each of them, in units, to maximize profits.
The company Color World manufactures three products that require the use of a special machine. There are only 20,000 machine hours available per month. Product information: Product A Product B Product C Sales price per unit $ 1,200.00 $ 1,600.00 $ 2,100.00 Variable costs per unit $ 700.00 $ 800.00 $ 1,000.00 Contribution margin per unit $ 500.00 $ 800.00 $ 1,100.00 Machine Time required (hours) 10/unit 20/unit 25/unit Estimated demand in units (per month) 500 1000 400 a) If all products require the same amount of machine-time and you can sell any amount of any product, which one should be manufactured to maximize profits? b) With the estimated demand, the machine-time restriction and the time required for each product, determine the optimal composition that should be sold of each of them, in units, to maximize profits.
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 12EA: Rough Stuff makes 2 products: khaki shorts and khaki pants for men. Each product passes through the...
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The company Color World manufactures three products that require the use of a special machine. There are only 20,000 machine hours available per month. Product information:
| Product A | Product B | Product C | |
| Sales price per unit | $ 1,200.00 | $ 1,600.00 | $ 2,100.00 |
| Variable costs per unit | $ 700.00 | $ 800.00 | $ 1,000.00 |
| Contribution margin per unit | $ 500.00 | $ 800.00 | $ 1,100.00 |
| Machine Time required (hours) | 10/unit | 20/unit | 25/unit |
| Estimated demand in units (per month) | 500 | 1000 | 400 |
a) If all products require the same amount of machine-time and you can sell any amount of any product, which one should be manufactured to maximize profits?
b) With the estimated demand, the machine-time restriction and the time required for each product, determine the optimal composition that should be sold of each of them, in units, to maximize profits.
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