Exercise D8-12 Balloon, Inc. produces three types of balloons-small, medium, and

Question

Exercise D8-12 Balloon, Inc. produces three types of balloons-small, medium, and large-with the following characteristics: Small Medium Large $8 $10 $5 Selling price per unit Variable cost per unit Contribution margin per unit Machine hours per unit Demand in units $3 2.4 1,000 $2 $4 500 800 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 Click if you would like to Show Work for this question:

Explanation / Answer

Small Medium Large Contribution margin per unit 2 3 4 Divide: Number of machine hours 1 2.4 3 Contribution Margin per hour 2 1.25 1.33 Ranking I III II Total Machine hours 2000 Less: Used for Small (500 units *1 hr) 500 Remaining hours available for Large 1500 Hours requied per unit 3 Number of Units of Large Product 500 In ordert o maximize the contribution, the number of units to be produced is as follows: Number of Units Small 500 Medium 0 large 500

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