Question

Wildhorse's Wind Toys manufactures decorative kites, banners, and windsocks. During the month of January, Wildhorse received orders for 3,000 Valentine’s Day banners and 1,400 Easter kites. Because several sewing machines are in the shop for repairs, Wildhorse has only 1,000 sewing machine hours available for production of these orders. Each Valentine’s Day banner sells for $12. The banners take one hour to sew and have a total variable cost of $9 per banner. The Easter kites sell for $15. They take 15 minutes to sew and have a total variable cost of $14.

(a)

With only 1,000 sewing machine hours available, how many units should Wildhorse produce for the below items?

		Enter a number of kites
		Enter a number of banners

Based on your calculations above, which products should Wendy prioritize for production in January?

Select a product                                                          KitesBanners

Answer 1

Calculation:

Particulars	Kites	Banners
Selling price per unit	$15.00	$12.00
Variable cost per unit	$14.00	$9.00
Contribution margin per unit	$1.00	$3.00
Machine hours per unit	0.20	1
Contribution margin per hour	$5.00	$3.00
Rank	1	2

As contribution margin per hour is highest for Kites, therefore machine hours will be first utilized for production of Kites thereafter banners.

Nos of hours required in 1400 kites = 1400 * 0.20 = 280 hours

Nos of banners to be produced with remaining hours = (1000 - 280) / 1 = 720

Therefore Wendy be able to produce:

Kites = 280

Banners = 720