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Decision making #3-Use of Limited Resources-Singe Constraint Bush Manufacturing has the following labor hours available for...

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 Total
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.
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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

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