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question 14

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Boylan Company manufactures two products-toaster ovens and bread machines. The following data are available: Toaster Ovens Bread Machines Sales price $70 $170 Variable costs $30 $60 Boylan can manufacture six toaster ovens per machine hour and four bread machines per machine hour. Boylan's production capacity is 1,600 machine hours per month. Marketing limitations indicate that Boylan can sell a maximum of 6,100 toasters and 4,100 bread machines per month. Which product and how many units should the company produce in a month to maximize profits? (Round machine hour per unit to two decimal places and your final answer to the nearest whole dollar.) A. 4,800 toaster ovens and 3,200 bread machines B. 6,400 bread machines O C. 3,450 toaster ovens and 4,100 bread machines OD. 9,600 toaster ovens

Answer 1

The correct answer is option ' C'

Given,

-Sales price for -

• Toaster ovens :$70
• Bread machines:$170

-Variable costs for-

• Toaster ovens:$30
• Bread machines:$60

-Units produced per machine hour:-

• Toaster ovens per machine hour:$6
• Bread machines per machine hour:$4

-Production capacity : 1600 machine hours per month

-Boylan can sell a maximum of 6100 toasters and 4100 bread machines

Particulars	Toaster ovens($)	Bread machines($)
Selling price per unit	70	170
Less:
Variable cost per unit	30	60
Contribution margin per unit(a)	40	110
Units produced per machine hour(b)	6	4
Contribution margin per machine hour (a*b)	240	440
Ranking	2	1

Total machine hours available for month = 1600 machine hours

At first, we should allocate machine hours to produce bread machine since contribution margin per machine hour high for bread machines.

By allocation 1600 machine hours, we can produce 6400 bread machines(1600×4 units per hr). But there is a marketing limitation that we can sell only 4100 bread machines

So first we should allocate the available machine hours to 4100 bread machines.

Machine hours needed for 4100 bread machines
= 4100/ 4 per hr
= 1025 machine hrs

Remaining machine hrs
= Total machine hrs - machine hrs needed for bread machines
= 1600 - 1025
= 575 machine hrs

The remaining 575 machine hrs should allocate to produce toaster ovens

So that
Toaster ovens produced
= 575 machine hrs × 6 per machine hr
= 3450 toaster ovens

Therefore,
To maximize profits, company should produce 3450 toaster ovens and 4100 bread machines

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