Question

Determining the Optimal Product Mix with One Constrained Resource

Comfy Fit Company manufactures two types of university sweatshirts, the Swoop and the Rufus, with unit contribution margins of $5 and $15, respectively. Regardless of type, each sweatshirt must be fed through a stitching machine to affix the appropriate university logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Swoop sweatshirt requires 6 minutes of machine time, and each Rufus sweatshirt requires 20 minutes of machine time.

Assume that there are no other constraints.

Required:

1. What is the contribution margin per hour of machine time for each type of sweatshirt? When computing your answers, round machine time per unit to two decimal places. Round your final answers to the nearest dollar.

	Contribution Margin
Swoop	$
Rufus	$

2. What is the optimal mix of sweatshirts? If an amount is zero, enter "0".

	Optimal Mix
Swoop	units
Rufus	units

3. What is the total contribution margin earned for the optimal mix?
$

Answer 1

1.

2.

The company leases 7 machines, each with 1000 hrs capacity, total capacity is thus 7000 hours,

it will produce a maximum of swoop as the contribution per machine hour is highest and none for Rufus

Swoop = (7,000 hours x 60 minutes) / 6 minutes per unit = 70,000 units

Rufus = 0 units

3.

Total contribution = no of units produced of swoop * cont margin/unit

=70000*5

=350000

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