Question

Aria’s Juice Bar can sell all the units it can produce of either apple juice or orange juice but not both. Apple juice has a unit contribution margin of $45 and takes three machine hours to make and orange juice has a unit contribution margin of $32 and takes two machine hours to make. There are 1,300 machine hours available to manufacture a product.

What should Aria’s Juice Bar do?

Select one:

a. Make apple juice which creates $13 more profit per unit than orange juice does

b. Make orange juice which creates $1 more profit per constraint than apple juice does

c. Make orange juice because more units can be made and sold than apple juice

d. The same total profits exists regardless of which product is made

e. None of the above

Answer 1

Ans:

First we calculate contribution per machine hour for Apple and Orange :

Apple :

Contribution per hour : $45

Number of Hours required per unit : 3

Contribution Per Hour : $45/3 = $15

Orange :

Contribution per hour : $32

Number of Hours required per unit : 2

Contribution Per Hour : $32/2 = $16

So Correct answer is option B.

Make orange juice which creates $1 more profit per constraint than apple juice does.

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