Hamlin Corporation produces three products, A1, B2, and C3. Each product uses th

Question

Hamlin Corporation produces three products, A1, B2, and C3. Each product uses the same type of direct material. A1 uses 4 ounces of the material, B2 uses 3 ounces of the material, and C3 uses 9 ounces of the material. Demand for all products is strong, but only 50,000 ounces of material are available. Information about the selling price per unit and variable costs per unit of each product is shown. Which products should be produced and filled first, then second, and then third? Show supporting calculations.
A1 B2 C3
Selling price per unit $160 $112 $210
Variable costs per unit 96 85 144

Explanation / Answer

Number of units per product: A1 = 50,000/4 = 12,500.00 B2 = 50,000/3 = 16,666.67 C3 = 50,000/9 = 5,555.56 Profits: A1 = 12,500*(160-96) = 800,000 B2 = 16,666.67*(112-85) = 450,000 C3 = 5,555.56*(210-144) = 366,666.96 So they should produce first A1, second B2 and third C3.

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