Determining the Optimal Product Mix with One Constrained Resource Comfy Fit Comp

Question

Determining the Optimal Product Mix with One Constrained Resource Comfy Fit Company manufactures two types of university sweatshirts, the Swoop and the Rufus, with unit contribution margins of $7 and $15, respectively. Regardless of type, each sweatshirt must be fed through a stitching machine to affix the appropriate university logo. The firm leases seven machines that each provides 1,000 hours of machine time per year. Each Swoop sweatshirt requires 6 minutes of machine time, and each Rufus sweatshirt requires 30 minutes of machine time. Assume that there are no other constraints. Required If required, round your answers to the nearest whole number. If an amount is zero, enter "o" 1. What is the contribution margin per hour of machine time for each type of sweatshirt? Contribution Margin Swoop Rufus 2. What is the optimal mix of sweatshirt? Optimal Mix Swoop Rufus 3. What is the total contribution margin earned for the optimal mix? units units

Explanation / Answer

Solution 1:

Solution 2:

As contribution margin per machine hour is highest for Swoop sweatshirts, therefore resources were first allocated to manufacture Swoop Sweat shirts. As there is no other constraints, therefore entire 7000 hours will be utilized to manufacture Swoop Sweatshirt.

Therefore optimal mix:

Swoop = 7000 / 0.1 = 70000 units

Rufus = 0 units

Solution 3:

Total contribution margin earned for optimal mix = 70000 * $7 = $490,000

Computation of contribution margkn per hour Particulars Swoop Rufus Contribution margin per unit $7.00 $15.00 Machine hour per unit (In hour) 0.1 0.5 Contribution margin per hour $70.00 $30.00

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