Question

Murphy’s, Inc. has the following production and cost data for two of its products, Standard and Deluxe:

		Standard		Deluxe
Contribution margin per unit		$67.62		$37.30
Machine hours needed per unit		2.10		1.00

A total of 80,000 hours is available each period for the production of the two products. The demand for both products is strong and Murphy will be able to sell as many of either product as it can produce. Ignoring qualitative issues, which of the two products should Murphy produce?

	Standard		Deluxe
Contribution margin per constraint		$		$

Murphy should produce the product.

Answer 1

Here constraintis machine hours because it is limited to 80000 hours
		Standard	Deluxe
Contribution margin per unit		$        67.62	$        37.30
Machine hours needed per unit		2.1	1
Contribution margin per constraint		$        32.20	$        37.30
Murphy should produce the product.	Deluxe
Because deluxe has greater contribution margin per constraint
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