Question

Decision making #3-Use of Limited Resources-Singe Constraint Bush Manufacturing has the following labor hours available for producing M and N: 25,000 Total Direct labor hours available Consider the following information: M N Required Labor per unit in hours 2 3 Maximum demand in units 8,000 7,000 Contribution Margin per unit 8 9 Required: What is the optimal product mix(how many M and N should be produced)? Explain your answer and show computations.

Answer 1

What is the optimal product mix(how many M and N should be produced)? Explain your answer and show computations.

	Product M	Product N
Contribution margin per unit	8	9
Labour hour per unit	2	3
Contribution margin per labour hour	4	3
Rank	2	1

Calculate optimal product Mix :

	Unit	Labour hour
Product N (7000*3)	7000	21000
Product M (25000-21000)/2	2000	4000

Optimal product Mix is 7000 Unit of product N and 2000 Unit of product M