Question

Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows. Product Standard $68 $27 Economy $41 $22 0.5 Selling price Variable costs and expenses Machine hours required Deluxe $136 $54 1.6 0.8 Calculate contribution margin per unit. Product Standard Economy Deluxe Contribution margin per unit $ e Textbook and Media Ignoring the machine time constraint, which single product should Tanek Industries produce? + e Textbook and Media

Answer 1

1
	Economy	Standard	Deluxe
Selling price	41	68	136
Less: Variable costs and expenses	22	27	54
Contribution margin per unit	19	41	82
Deluxe should be produced, as it has highest Contribution margin per unit

2
	Economy	Standard	Deluxe
Contribution margin per unit	19	41	82
Divide by Machine hours required	0.5	0.8	1.6
Contribution margin per limited resource	38.00	51.25	51.25
The additional time should be used to produce Standard or Deluxe