Question

Product mix, constrained resource. Wechsler Company produces three products: A130, B324, and C587. All three products...

Product mix, constrained resource. Wechsler Company produces three products: A130, B324, and C587. All three products use the same direct material, Brac. Unit data for the three products are:

A130 B324 C587

Selling price $252 $168 $210

Variable Costs:

Direct Materials $72 $45 $27

Labor and other costs $84 $81 $120

Quantity of Brac/unit 8lb 5lb 3lb

The demand for the products far exceeds the direct materials available to produce the products. Brac costs $9 per pound, and a maximum of 5,000 pounds is available each month. Wechsler must produce a minimum of 200 units of each product

Required:.

  1. How many units of product A130, B324, and C587 should Wechsler produce?

  2. What is the maximum amount Wechsler would be willing to pay for another 1,200 pounds of Brac?

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Answer #1

Requirement -2

Wechsle will be willing to pay a maximum of "contribution margin per pound of Brac"  derived from the lowest contribution producing product. That is B324.

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