Question

5.

Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine’s capacity is 2,100 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 3,570 units of Product TLX and 1,955 units of Product MTV. Selling prices and variable costs per unit to produce the products follow.

$ per unit	Product TLX				Product MTV
Selling price per unit		$	14.00			$	8.40
Variable costs per unit			4.20				5.04

Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round per unit contribution margins to 2 decimal places.)

	Product TLX	Product MTV
Contribution margin per unit
Units produced per hour
Contribution margin per production hour
	Product TLX	Product MTV	Total
Maximum number of units to be sold	3,570	1,955
Hours required to produce maximum units
For Most Profitable Sales Mix	Product TLX	Product MTV	Total
Hours dedicated to the production of each product
Units produced for most profitable sales mix
Contribution margin per unit
Total contribution margin

Answer 1

1.

	Product TLX	Product MTV
Contribution margin per unit	$9.8($14-$4.20)	$3.36($8.40-$5.04)
Units produced per hour	2	5
Contribution margin per production hour	$19.6	$16.8

2.

	Product TLX	Product MTV	Total
Maximum number of units to be sold	3,570	1,955	5,525
Hours required to produce maximum units	1,785(3,570/2)	391(1955/5)	2,176

3.

For most profitable sales mix	Product TLX	Product MTV	Total
Hours dedicated to Production of each product	1,785	315(2,00-1,785)	2,100
Units produced for most profitable sales mix	3,570(1,785×2)	1,525(315×5)	5,145
Contribution margin per unit	$19.6	$16.8
Total Contribution margin	$69,972	$26,460	$96,432

______×_____