4. Alphabet Custom Products Company produces thrediferent products that all requ

Question

4. Alphabet Custom Products Company produces thrediferent products that all require processing on the same machines. There are only 27,000 machine hours available in each year. Production information for each product is: Product A B Sales price per unit $20.00 $38.00$35.00 Variable costs per $12.00s26.00 $17.00 unit Machine hours necessary to produce 2.5 4.04.50 one unit Required: (1) Determine the preferred sales mix and total contribution margin any of the products. (2) Determine the preferred sales mix and tota for each product (3) Determine the preferre for each product if there are no market constraints on I contribution margin if the demand is limited to 5,000 units d sales mix and total contribution margin if the demand is limited to 3,000 units

Explanation / Answer

For question2

Hence total 5000 units of C and 1125 units of B to be p[roduced

For Question 3

Product A=600 units

Product B=3000 units

Product C=3000 units

Calculation of Contribution per product Particulars A B C Sale price per unit 20 38 35 Less Variable Cost per unit 12 26 17 Contribution per unit 8 12 18 Machine hours required per unit 2.5 4 4.5 There are 27000 machine hours for question 1 Since there are no restrictions on production we produce total of product C itself as it gives higher contribution Hence no of products of C can be produced=Total Machine hours/No of machine hours per product =27000/4.5 6000 units

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