Gordon Company produces two types of gears, Gear Q and Gear S, with unit contrib
ID: 2486281 • Letter: G
Question
Gordon Company produces two types of gears, Gear Q and Gear S, with unit contribution margins of $2 and $5, respectively. Each gear must spend time on a special machine. The firm owns ten machines that together provide 25,000 hours of machine time per year. Gear Q requires 0.10 hours of machine time; Gear S requires 0.40 hours of machine time.
Required:
If required, round your answers to the nearest cent. If an amount is zero, enter "0".
A. What is the contribution margin per hour of machine time for Gear Q? Gear S?
B. If Gordon faces only the production constraint (25,000 hours of machine time), how many units of Gear Q should be produced? Gear S?
What is the total contribution margin from this product mix?
$
C. Now suppose that Gordon cannot sell more than 200,000 units of each type of gear. How many units of Gear Q should be produced? Gear S?
What is the total contribution margin from this product mix?
$
Explanation / Answer
Q S total contribution 2 5 hour per unit 0.1 0.4 a contribution per hr 20 12.5 rank 1 2 b allocation of hrs 25000 0 total contribution 500000 0 500000 c allocation of hrs 20000 5000 25000 units 200000 12500 d total contribution 400000 62500 462500
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