XYZ Co. manufactures two types of toilet paper: ultra-strong and ultra-soft. Because of a recent shortage of chlorine-based bleach, a key ingredient needed for the two products, the company has to decide what amount of each product would be most advantageous to produce. Information related to the two products that use chlorine-based bleach are shown below: Ultra-strong Ultra-soft Contribution margin per case $25 $28 Contribution margin ratio 50% 70% Chlorine-based bleach required per case (in liters) 5 7 Maximum monthly demand (in cases) unlimited unlimited Assume that XYZ Co. only has 3,500 liters of Chlorine-based bleach available next month. What is the maximum amount of contribution margin that the company can generate next month from the two products above given the shortage of Chlorine-based bleach? A. $14,000 B. $15,750 C. $17,500 D. $19,250
Correct Answer is Option C.
Explanation :
Statement of Ranking
| Particulars | Ultra Strong | Ultra Soft |
| Contribution Margin (A) | $25.00 | $28.00 |
| Chlorine Based Beach Rquired per case ( Liter) (B) | 5 | 7 |
| Contribution Margin Per Liter (A/B) | 5 | 4 |
| Ranking | I | II |
| Demand | Unlimited | Unlimited |
| Possible Units of Ultra Strong ( 3,500/5) | 700 Cases |
| Maximum Amount of Contribution Margin (700*25) | $17,500.00 |
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