Bandy Corporation owns a machine which manufactures lawn games. Production time

Question

Bandy Corporation owns a machine which manufactures lawn games. Production time for the croquet set is ten units per hour and for the volley ball game is eight units per hour. The machine's capacity is 1,500 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 4,000 croquet sets and 10,000 volley ball games. Selling prices and variable costs per unit are shown below. Based on this information, what is Bandy Corporation's most profitable sales mix?

A 15,000 croquet sets.

B 2,500 croquet sets and 10,000 volleyball games.
C 4,000 croquet sets and 8,800 volleyball games.
D 12,000 volleyball games.
E 4,000 croquet sets and 10,000 volleyball games.

Explanation / Answer

Croquet set Volleyball game Selling price per unit 75 62 Variable costs per unit 42 25 Unit contribution margin 33 37 Hours per unit 0.1 0.125 Contribution margin per hour 330 296 Preference 1 2 Hours to produce croque = 4000/10 = 400 Hours to produce volleyball =(1500-400)=1100 Volleygame games to be produced = 1100/0.125= 8800 Option C 4,000 croquet sets and 8,800 volleyball games.

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