Chapter 25, Problem 6E

Exercise 25-6 Sales mix determination and analysis P3

Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine's capacity is 2,750 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 4,700 units of Product TLX and 2,500 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. Determine (1) the company's most profitable sales mix and (2) the contribution margin that results from that sales mix.
$ Per unit

product TLX
Product MTV
Selling price per unit.......................... $15.00 $9.50
Variable costs per unit......................... 4.80 5.50

Check (2) $55,940