Question
Joe Company produces three types of donuts, Giant, Humungous and Death by Donut, that are in...
Joe Company produces three types of donuts, Giant, Humungous and Death by Donut, that are in high demand. Following is information for each of these products:
|
Giant |
Humungous |
Death by Donut |
|
|
Selling price per item |
$16.75 |
$18.50 |
$25.60 |
|
Variable cost per item |
14.00 |
13.50 |
19.20 |
|
Contribution margin per item |
$2.75 |
$5.00 |
$6.40 |
|
Machine hours per item |
1.25 |
.75 |
1.5 |
|
Orders |
800 |
600 |
700 |
Joe has a resource constraint of 2,000 machine hours available each month. Demand for each type of donut exceeds Joe’s capacity to produce the item.
- In order to maximize the company’s total contribution margin, in what sequence should Joe fill orders?
- How many of each should he produce?
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Answer #1
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