Question

Casual Essentials, Inc. manufactures two types of team shirts, the Homerun and the Goalpost, with unit contribution margins of $5 and $15, respectively. Regardless of type, each team shirts must be fed through a stitching machine to affix the appropriate team logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Homerun shirt requires 6 minutes of machine time, and each Goalpost shirt requires 30 minutes of machine time.

Assume that a maximum of 49,870 units of each team shirts can be sold.

Required:

If required, round your answers to the nearest whole number.

1. What is the contribution margin per hour of machine time for each type of team shirts?

	Contribution Margin
Homerun	$
Goalpost	$

2. What is the optimal mix of team shirts?

	Optimal Mix
Homerun	units
Goalpost	units

3. What is the total contribution margin earned for the optimal mix?
$

Answer 1

[1]
		Homerun	Goalpost
	Time Required Per Unit	0.1	0.5
	Contribution Per Unit	5	15
Formula	Contribution Per Unit/Time Required Per Unit
	Contribution Per Hour	50	30
[2]	Calculation of Optimal Units
	Maximum Units of Homerun Needs to be Produced as it's Per hour Contribution is Highest
	Total Minutes	420000	(60*7*1000 Hours/Machine)
	Less:
	Maximum Possible Production of Homerun T-shirt	42000
	42000
	(7000*60)/10
	Profit Per Unit	5
	Optimal Mix	42000	0
[3]	Maximum Contribution	210000