Question

You opened an amazing little bakery and now have more demand for your product that you can produce! It is just you, and you would like to work 10 hours a day, 5 days per week producing your products. If wedding cakes contribute $15/ hour and you charge $500 each, birthday cakes, $14/ hour and you charge $65 each and cupcakes $16.50/hour and you charge $2 each, which product do you produce first if you cannot fulfill the total demand?

A) Wedding cakes

B) Birthday Cakes

C) Cupcakes

Answer 1

Since in the given question demand is more than what we can produce and we have limiting factor of hours in the given question as person is willing to work 5 days for 10 hours a day.

In this case we will produce product which has highest contribution margin per limiting factor. So in our case limiting factor is hours, so product with highest contribution margin per hour will be produced first.

The cup cakes has highest contribution margin of $ 16.5/ hour

So we should produce cup cakes first.

For any help please comment in the comment box.