Power Recreation, Inc. (PR) manufactures engines for commercial and consumer pro

Question

Power Recreation, Inc. (PR) manufactures engines for commercial and consumer products. They manufacture two engines in Department A: a snowmobile engine that has a selling price of $800 per unit and variable costs of $560 per unit and a boat engine that has a selling price of $1,000 and variable costs of $625 per unit. Each snowmobile engine requires 4 machine hours and each boat engine requires 10 machine hours. There is a constraint of 1,000 machine hours.

Suppose that PR can sell as many snowmobile engines and as many boat engines as it can manufacture.How many snowmobile engines and boat engines should PR manufacture?What is the total contribution margin for this combination?

Snowmobile engines

Boat engines

Contribution margin

Suppose that PR can sell only 80 snowmobile engines and no more than 100 boat engines.How many snowmobile engines and boat engines should PR manufacture?What is the total contribution margin for this combination?

Snowmobile engines

Boat engines

Contribution margin

Snowmobile engines

Boat engines

Contribution margin

Explanation / Answer

Solution:

Snowmobile Boat Selling price per unit 800 1000 Less: Variable cost per unit 560 625 Contribution 240 375 Machine hours used 4 10 Contribution per unit 60 37.5 Ranking I II

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