Question

hirts, the Swoop and the ardless of type, each Use the following information for Brief Exercises 8-22 and 8-23: Comfy Fit Company manufactures two types of university sweatshirts, the Swoon an Rufus, with unit contribution margins of $5 and $15, respectively. Regardless of the sweatshirt must be fed through a stitching machine to affix the appropriate university The firm leases seven machines that each provides 1,000 hours of machine time ne Each Swoop sweatshirt requires 6 minutes of machine time, and each Rufus sweated requires 20 minutes of machine time. (Note: For all answers that are less than 1.0. round the answer to two decimal places. For all unit answers (e.g., the answer is greater than 1.0% round the answer to the nearest whole number.] Brief Exercise 8-22 Determining the optimal Product Mix with One Constrained Resource Refer to the information for Comfy Fit Company above. Assume that there are no other constraints. Required: 1. What is the contribution margin per hour of machine time for each type of sweatshirt? 2. What is the optimal mix of sweatshirts? 3. What is the total contribution margin earned for the optimal mix?

Answer 1

Requirement 1 Contribution Margin per unit (A) Required Machine time per unit (B) Contribution margin per hour of machine time(A/B) Swoop Rufus $ 5.00 $ 15.00 0.1 0.33 $ 50.00 $ 45.00 Working Note: Required Machine time per unit (B) 6 Minutes = 6/60 = 0.10 Hour 20 Minutes = 20/60 = 0.333 hours Requirement 2 Since Swoop Will result in Higher Contribution margin per hour It will be given the first priority So Maximum of 40000 units can be sold for each variety 40,000 units requires = 40,000 units * 0.10 hour per unit = 4000 Hours Total Number of Machine hours available = 7 machines * 1000 hours per each machine Less : Number of hours for Swoop Remaining Machine Hours for Rufus Number of units of rufus can be made with 3000 hours = 3000/0.333 (If taken only 2 decimals like 0.33 it will be 9091 units) 7000 Hours -4000 Hours 3000 Hours 9000 Therefore Optimal mix = 40,000 units of Swoop and 9000 units of Rufus Requirement 3 Total Contribution Margin for optimal mix Swoop: 40000*15 Rufus : 9000*45 $ 200,000.00 $ 135,000.00 $ 335,000.00 Note: Here Solution was given by taking round off figures and not decimals If taken decimals only change will be for rufus I.e., 9091 units and contribution margin will change along with that