Exercise 8-12 Crane, Inc. produces three types of balloons-small, medium, and la

Question

Exercise 8-12 Crane, Inc. produces three types of balloons-small, medium, and large-with the following characteristics: mall Medium Large $8$10 6 $4 $5 Selling price per unit Variable cost per unit Contribution margin per unit Machine hours per unit Demand in units $2 $3 2.4 1,030 500 880 The company has only 2,000 machine hours available each month How many units of each type of balloon should the company make to maximize its total contribution margin? (Round answers to 0 decimal places, e.g. 5,275.) Units Small Medium Large

Explanation / Answer

Here in this question limiting factor is machine hours , so contribution per machine hour is to be calculated Small Medium Large Sales 5 8 10 V.C 3 5 6 Contribution margin per unit 2 3 4 Machine hours per unit 1 2.4 3 Contribution per machine hour Contribution / machine hours 2 1.25 1.33 Ranking 1 3 2 Units to produce 500 0 500 Hours required (2000-500)=1500 1500/3 hours per unit = 500 500*1 500*3 500 1500 Small 500 Medium 0 Large 500

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