Question

Southern Production Company has 100 labor-hours available. There is no limit on machine-hours. Southern can sell all of B it wants, but it can only sell 45 units and 20 units of A and C, respectively

	Product A	Product B	Product C
Contribution margin per unit	$15	$10	$12
Labor-hours per unit	2	2.5	2
Machine-hours per unit	5	4	1

Which model is the most profitable to produce? Why?

Answer 1

Ans:

Particulars	Product A	Product B	Product C
Contribution margin per unit	15	10	12
Labor-hours per unit	2	2.5	2
Machine-hours per unit	5	4	1
Limit on sale	45 units	No limit	20 Units

Total labor hours available= 100 hours

In order to get profits southern production company must produce 45 units of Product A i.e. 45*2= 90 hours;in the remaining 10 hours, Product C must produce 5 units i.e. (10/2 labor hours per unit)

therefore southern com must produces 45 units of Product A and 5 units of product C