Question

Pappy's Toys makes two models of a metal toy-Standard and DeLuxe. Both models are produced on a single machine. The price and costs of the two models appear as follows. Price per unit Variable cost per unit Machine hours per unit Standard DeLuxe $ 40 $ 60 $ 20 $ 24 0.5 1.5 The one machine that used to produce both models has a capacity of 90,000 machine-hours per quarter. Fixed manufacturing costs per quarter are $800,000. Required: a. Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 200,000 units of each product. How many units of each model should Pappy's produce in a quarter? b. Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 120,000 units of each product. How many units of each model should Pappy's produce in a quarter? Complete this question by entering your answers in the tabs below. Required A Required B Suppose that the maximum unit sales in a quarter that Pappy's can achieve is 200,000 units of each product. How many units of each model should Pappy's produce in a quarter?

Standard Model Units

Deluxe Model Units

Answer 1

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Pappy's Toy
Workings
Contribution margin per machine hour	Standard	Deluxe
Selling price per unit	40.00	60.00	A
Variable cost per unit	20.00	24.00	B
Contribution per unit ($)	20.00	36.00	C=A-B
Machine hour per unit	0.50	1.50	D
Contribution per machine hour ($)	40.00	24.00	E=C/D
Rank	1	2
Note
For optimal utilization of machine hour product will be produced first whose contribution per machine our is highest. So here demand for Standard should be met first then remaining machine hour should be utilized for Deluxe product.
Answer a
Machine hours available		90,000.00
Demand for Standard	200,000.00
Machine hours for Standard		100,000.00	This is Demand for Standard* Machine hour per unit.
Machine hours available		(10,000.00)
In this case Pappy is unable to fulfill even maximum demand of Standard product. So it should utilized total machine hours for Standard produce and should not produce a single unit of Deluxe product.
Final Answer for a	Standard	Deluxe
Machine hour per unit	0.50	1.50
Machine hours available	90,000.00
Units to be produced	180,000.00	-
Answer b
Machine hours available		90,000.00
Demand for Standard	120,000.00
Machine hours for Standard		60,000.00	This is Demand for Standard* Machine hour per unit.
Machine hours available after making Standard		30,000.00	This is Machine hours available less Machine hours for Standard.
Machine hour per unit of Deluxe		1.50
Number of units to be produced of Deluxe		20,000.00	This is Machine hours available after making Standard/ Machine hour per unit of Deluxe.
Final Answer for b	Standard	Deluxe
Units to be produced	120,000.00	20,000.00