Question

Exercise 10-9 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 2,750 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 4,700 units of Product TLX and 2,500 units of Product MTV. Selling prices and variable costs per unit to produce the products follow.

$s per unit	Product TLX				Product MTV
Selling price per unit		$	15.00			$	9.50
Variable costs per unit			4.80				5.50

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

Product TLX Product MTV Contribution margin per unit Contribution margin per production hour ſ Total Product TLX 4,700 Product MTV 2,500 Maximum number of units to be sold Hours required to produce maximum units Product TLX Product MTV Total For Most Profitable Sales Mix Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin

Answer 1

				product	Product
				TLX	MTV
Contribution margin per unit				10.2	5
units produced per hour				2	5
contribution margin per production hour				20.40	25
				product	Product	total
				TLX	MTV
maximum number of units to be sold				4,700	2,500
hours required to produced maximum units				2350	500	2850
				product	Product	total
For most Profitable sales mix				TLX	MTV
hours dedicated to the production of each				2350	400	2750
	Produce most profitable units until the market demand has been satisfied
units produced for most profitable sales mix				4,700	2000
contribution margin per unit				10.2	5
total contribution margin				47940	10000	57940