chine B for at most 19 hours. How many each window should the company make in the coming week in order to maximize its profit? What is this maximum profit?
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
![Star Insulating Company manufactures two
types of storm windows: Model H, the heavy
duty, and Model R, the regular. Model H
sells for $35 per window and costs $26 per
window to make, whereas Model R sells for
$28 per window and costs $20 per window
to make. To make one Model H window, it
requires four hours on Machine A and three
hours on Machine B. On the other hand, to
make one Model R window, it takes five
hours on Machine A and two hours on Ma-
chine B. Production scheduling indicates
that during the coming week Machine A will
be available for at most 30 hours and Ma-
chine B for at most 19 hours. How many of
each window should the company make in
the coming week in order to maximize its
profit? What is this maximum profit?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0595aa9d-70af-4e24-86cf-bb0daecd6717%2F0eafc0cb-0153-4278-92e4-6e0887d62bed%2Fri4pxks_processed.jpeg&w=3840&q=75)
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