Question

Colt Company owns a machine that can produce two specialized products Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine's capacity is 2,100 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 3,570 units of Product TLX and 4,010 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. $ per unit Selling price per unit Variable costs por unit Product LX $13.50 Product MTV $8.10 4.96 4.05 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round per unit contribution margins to 2 decimal places.) Product TLX Product MTV Contribution margin per unit Units produced per hour Contribution margin per production hour Total Product TLX 3.570 Product MTV 4 010 Maximum number of units to be sold Hours required to produce maximum units < Prev 23 of 26 !! Next >

Answer 1

	Product TLX	Product MTV
Contribution Margin Per Unit (Selling Price - Variable Cost)	9.45	3.24
Unit Produced Per Hour	3	4
Contribution Margin Per hour	28.35	12.96
	Product TLX	Product MTV	Total
Maximum No. of units sold	3570	4010	7580
Hours Required (Unit/Hourly production)	1190	1002.5	2192.5
For Most Profitable Mix	Total
Hours Dedicated	1190	910	2100
Unit Produced	3570	3640	7210
Contribution Margin Per unit	9.45	3.24	12.69
Total Contribution Margin	33736.5	11793.6	45530.1

Note : The contribution margin per hour is higher for Product TLX and therefore, maximum time is allowed to produce maximum required units of it first, to ensure most profitable mix.