Question

Exercise 23-9 Sales mix determination and analysis LO A1 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 2,500 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 4,250 units of Product TLX and 2,215 units of Product MTV Selling prices and variable costs per unit to produce the products follow. $s per unit Selling price per unit Variable costs per unit Product TLX $14.00 Product MTV $8.40 5.04 4.20 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round cost per unit answers to 2 decimal places.) Product MTV Product TLX Contribution margin per unit Contribution margin per production hour Product TLX Product MTV Total Maximum number of units to be sold 4,250 2,215 Hours required to produce maximum units Total For Most Profitable Sales Mix Product TLX Product MTV Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin

Answer 1

Answer

Working		Product TLX	Product MTV
A	Contribution margin per unit	$9.80	$3.36
B	production hours per unit	0.500000	0.200000
C = A/B	Contribution margin per production hour	$19.60	$16.80
		Product TLX	Product MTV	Total
D	Maximum no. of units to be sold	4,250	2,215
E = D x B	Hours requied to produce maximum units	2,125	443	2,568
		Product TLX	Product MTV	Total
F	Hours dedicated to production of each product	2,125	375	2,500
G = F/B	Units produced for most profitable sales mix	4,250	1,875	6,125
H = A	Contribution margin per unit	$9.80	$3.36
I = G x H	Total Contribution margin	$41,650.00	$6,300.00	$47,950.00