Question

Thermic co produce 2 product lines: Warm o Martic and Thermorobot. The manager are deciding which product line to emphasize and to make decision they assembly the following data: Warm o Matic: Sales price per unit: $65; Variable expenses per unit $35; contribution margin per unit $30; monthly market demand 19000. Thermorobot: sales price per unit $160; Variable expenses per unit $100; contribution margin per unit $60; monthly market demand 6500. The factory has a production capacity of 1500 hours per months. The plant can manufacture 20 Warm o Matics or 8 Thermorobot per machine hour. What is the product mix that maximizes Thermic Co s month,y operating profit?

Answer 1

	Warm o Martic	Thermorobot
Contribution margin per unit	30	60
Machine hour per unit	0.05	0.125
Contribution margin per machine hour	600	480
Therefore it is profitable to produce Warm o Martic first
Machine hours required to satisfy Warm o Martic monthly demand =(19000*0.05)= 950
Machine hours for Thermobot monthly demand=(1500-950)=550
Production for Thermobot = 550/0.125=	4400
Product mix:
Warm o Martic	19000
Thermorobot	4400