Question

Patriotic Pyros (PP) is a fireworks manufacturing company. Annual celebrations are rapidly approaching, and PP only has 50 pounds of powder left (and their suppliers have run out as well). PP manufactures two types of fireworks: Aerials (for large venues) and Grounders (for home use).

Management is wondering which fireworks should be produced with the remaining powder, in order to maximize profits. The following information shows the per-unit information regarding the production and sale of these fireworks:

	Aerials	Grounders
Pounds of powder	2 lbs.	0.75 lbs.
Direct materials	$5.00	$1.25
Direct labor	$6.00	$3.00
Variable overhead	$1.00	$0.50
Fixed overhead	$2.00	$1.00
Selling price	$50.00	$20.00

Assume that selling costs are negligible at this point, given the current market for fireworks and PP’s established network.

Which type of firework would be the most profitable for PP to produce?

Select one or more:

a. Grounders

b. Arials

Answer 1