Question

A. C .Tech Manufacturing Appliances manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below.

Small Medium Large

Unit selling price $430 $550 $1,230

Unit costs:

Variable manufacturing (200) (320) (700)

Fixed manufacturing (50) (140) (240)

Fixed selling and administrative (90) (25) (130)

Unit profit $90 $65 $160

Demand in units 170 130 170

Machine-hours per unit 70 40 170

The maximum machine-hours available are 6,200 per week.

How many of each product should be produced per month using the short-run profit maximizing strategy?

A.

0 130 7

B.

170 70 40

C.

170 170 0

D.

14 130 0

Answer 1

Calculation of profit per machine hour -

	small	medium	large
profit per unit	90	65	160
machine hr. required for each unit	70	40	170
profit per mach. hr	1.286	1.625	0.94
ranking for manufacturing decision	2	1	3

maximum machine hrs. available = 6200

statement of best product mix-

	hrs. allocated	units to be produced
medium	130 units*40hrs. per unit= 5200	130 uits
small	14 units* 70 hrs. per unit=980	14 units
large	0 units	0 units