Question

Consider the following production and cost data for two products, K and T: Product K Product...

Consider the following production and cost data for two products, K and T:

Product K Product T
Contribution margin per unit $35 $40
Machine minutes needed per unit 7 minutes 5 minutes


A total of 14,700 machine minutes are available each period, and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period?

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Answer #1
Product K Product T
Contribution Margin per Unit $35 $40
Machine minutes needed per unit 7 mins 5 mins
Contribution Per Machine Minute =35/7 =40/5
5 8
Ranking based on contribution per machine Minute 2 1
Demand Unlimited Unlimited
In this case, as the demand for both the product is unlimited so we will produce the product with higher Contribution per Machine Minute.
Total Available Machine Hour 14700 Minutes
Contribution Margin per machine minutes for Product T $8
Maximum Possible Total Contribution Margin =14700*$8
117600
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