Question

Marshall, Inc., produces three products but weekly demand for the three products exceed the available amount of machine time. Following is information about each product:

  

	Product A				Product B				Product C
Contribution margin per unit	$	300			$	400			$	150
Machine hours per unit		3				2				0.50
Weekly demand (units)		100				300				800

(a.) Determine how many units each of Product A, Product B, and Product C that Marshall, Inc., should produce each week assuming 1,000 hours of available machine time.

Answer 1

Requirement (a):

	Product A	Product B	Product C
Contribution margin per unit	$300	$400	$150
x Weekly demand (units)	100	300	800
= Total contribution margin	$30,000	$120,000	$120,000
Machine hours per unit	3	2	0.5
x Weekly demand (units)	100	300	800
Total machine hours	300	600	400

To get maximum profit, The total 1,000 hours should be assigned on the basis of highest contribution margin.

Product C & Product B had highest contribution margin.

Therefore, to get maximum profit those 1,000 hours Should be assigned as follows,

• 600 machine hours of Product B &
• 400 machine hours of Product C

And Product A should be ignored.