Question

1. Venz Company manufactures LED TVs, stereos and speakers, using a common parts inventory of chassis, LCD Screens, speakers, power supplies and various internal electronics. Parts are in limited supply and you must determine the most profitable mix of products to build. The table below contains the part requirement per product, part inventory available, and contribution margin per product.

Part Name	LED TV	Stereo	Speaker	Available
Chassis	1	1	0	450
LED Screen	1	0	0	250
Speaker	2	2	0	800
Power Supply	1	1	0	450
Internal Electronics	2	1	1	600
Contribution Margin	$75	$50	$35

Required:

What is the most profitable product mix?

Answer 1

Maximum Contribution Margin is in LED TV.

Hence maximum critical resources should be allocated to LED TV

Part Name	Inventory	Quantity Required per LED TV	Maximum LED TV that can be produced
Chasis	450	1	450
LED Screen	250	1	250
Speaker	800	2	400
Power Supply	450	1	450
Internal Electronics	600	2	300

Hence , 250 LED TVs should be produced

Balance Inventory:

Chasis:450-250=200

LED Screen=250-250=0

Speaker=800-(2*250)=300

Power Supply:450-250=200

Internal Electronics:600-(2*250)=100

Next highest contribution margin is provided by Stereo

Part Name	Inventory	Quantity Required per Stereo	Maximum Number Stereo that can be produced	Number of parts used for 100 Stereos	Balance Inventory
Chasis	200	1	200	100	100
LED Screen	0	0		0	0
Speaker	300	2	150	200	100
Power Supply	200	1	200	100	100
Internal Electronics	100	1	100	100	0

Number of Stereos Produced =100

Since Internal Electronics Inventory =0, Speakers cannot be produced.

Most Profitable Mix:

Product	Quantity	Unit Contribution	Total Contribution
LED TV	250	$75	$18,750
STEREO	100	$50	$5,000

Total Contribution: 18750+5000=$23,750