Question

Taco Company manufactures three products. Each of the three types requires the use of a special machine that has a total operating capacity of 15,000 hours per year. Information on the three types of products is as follows:

X Y Z Selling price

$9.00 $30.00 $35.00 Variable cost

$6.00 $20.00 $10.00 Machine hours required

0.10 0.50 0.75 Taco Company's marketing director has assessed demand for the three types of products and believes that the firm can sell as many units as it can produce. Required 1-How many of each type of unit should be produced and sold to maximize the company's contribution margin? What is the total contribution margin for your selection?

2. Now, suppose that Taco Company believes that it can sell no more than 12,000 of the Z but up to 30.000 each of the X and Y at the selling prices estimated. What product mix would you recommend, and what would the total contribution margin be?

Answer 1

Z X $9.00 $ 6:00 $ 3.00 0.10 y 630.00 £20:00 $ 10.00 $8o.oo $30.00 $33.33 Yarticulars Selling Pice $35.00 Variable cast Contribution Margin (H $25.00 Machine Mould required °(B) Contribution Margin Par Machine Howrs (A/B) $ 20.00 Heralysing the above, Taco company shall only sell I units elith contribution margin of $28.23, par machine how can produce 20000 2 units per year Lisood%75) These 20,000 units, multiplied by the $25 contribution pour cerit would yield a total contribution margin of $5,00,000. Taco Company . 12,000 2 units shall be produced and sold, using 9,000 machine hours / 12000 X. 7). Then, produce and sell 30,000 basie Kunits, which would use 3,000 machine howd, zahth Finallywith the premaining 1000 machine howu, produce 2000 ly units! Fequired product min uduld be X = 30,000 units Y 2,000 units 12000 units "Total Contribuchiên Maszin = (3000x3) + (2000X1b) + (1200082s) 90,000 + 20,000 + 10,000 300,000 =$1,70,000 $410,000 z =