Sharp Company manufactures two models, Standard and Premium.Weekly demand is est

Question

Sharp Company manufactures two models, Standard and Premium.Weekly demand is estimated to be 120 units of the Standard Modeland 70 units of the Premium Model. Only 420 machine hours areavailable per week. The following per unit data apply:

                                                                             Standard             Premium

         Contributionmargin perunit                            $12                       $15

         Number ofmachine hoursrequired                      2                           3

        a.      For each model, compute thecontribution margin per machine hour.

        b.      To maximize weekly productionprofits, how many machine hours would you allocate to each model?How many units would be produced of each model?

        c.      If there are 500 machine hoursavailable per week (instead of only 420 machine hours per week),how many units of each model should Sharp produce to maximizeprofits?

Explanation / Answer

         Contributionmargin perunit                            $12                       $15

         Number ofmachine hoursrequired                      2                           3

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