Kinnane\'s Fine Furniture manufactures two models, Standard and Premium. Weekly
ID: 2597829 • Letter: K
Question
Kinnane's Fine Furniture manufactures two models, Standard and Premium. Weekly demand is estimated to be 106 units of the Standard Model and 74 units of the Premium Model. The following per unit data apply Standard $21 Premium $24 Contribution margin per unit Number of machine-hours required If there are 495 machine-hours available per week, how many rockers of each model should KInnance produce to maximize profits? OA. 106 units of Standard and 74 units of Premium OB, 83 units of Standard and 41 units of Premium O C. 106 units of Standard and 29 units of Premium O D. 17 units of Standard and 74 units of PremiumExplanation / Answer
Answer to Question 1.
Option C i.e. 106 Units of Standard and 29 Units of Premium.
Standard:
Contribution Margin per Machine Hour = 21 / 3 = $7
Premium:
Contribution Margin per Machine Hour = 24 / 6 = $4
The Kinnane’s Fine Furniture should produce the Standard Model more in preference to Premium Model, as it has higher Contribution Margin per Machine Hour. The Kinnane’s Fine Furniture should manufacture the complete weekly demand of Standard Product for 106 Units and if any Machine hours are remaining after the manufacturing of Standard product will be applied to manufacturing of Premium product.
Total Machine Hours available = 495 Machine Hours
Machine Hours applied to Standard Model = 106 Units * 3
Machine Hours applied to Standard Model = 318 Machine Hours
Machine Hours available for Premium model = 495 – 318
Machine Hours available for Premium model = 177 Machine Hours
No. of Units that can be manufactured from Machine Hours available = 177 / 6 = 29.5 Units or 29 Units
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