Figure 20-4 Montgomery Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labor hours and 300 machine hours are available for production.
Time requirements to produce one unit of A and B are as follows:
Refer to Figure 20-4. What is the objective function to maximize profits for Montgomery Company?
A) Minimize 6A + 3B
B) Maximize 2A + 5B
C) Minimize 40A + 30B
D) Maximize 40A + 30B

Question

Figure 20-4 Montgomery Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labor hours and 300 machine hours are available for production.
Time requirements to produce one unit of A and B are as follows:
 Refer to Figure 20-4. What is the objective function to maximize profits for Montgomery Company?
A) Minimize 6A + 3B 
B) Maximize 2A + 5B 
C) Minimize 40A + 30B 
D) Maximize 40A + 30B

Quizplus · Accepted Answer

The objective function is to maximize profits. Therefore, we need to maximize the contribution margin per unit, which are $40 for A and $30 for B. Thus, the objective function is Maximize 40A + 30B.

Figure 20-4 Montgomery Company Produces a and B with Contribution