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The Ramos Company Manufactures Two Products: Treadmills and Elliptical Trainers

Question 104

Essay

The Ramos Company manufactures two products: Treadmills and Elliptical Trainers. The costs and revenues are as follows:
 Elliptical  Treadrnill  Trainer  Sales price per unit $300$175 Variable cost per urit 16085\begin{array} { l c r } & & \text { Elliptical } \\& \text { Treadrnill } & \text { Trainer } \\\text { Sales price per unit } & \$ 300 & \$ 175 \\ \text { Variable cost per urit } & 160 & 85\end{array}

Total demand for the Treadmill product is 7,000 units and for the Elliptical Trainer product is 5,000 units. Machine time is a scarce resource. During the year, 48,000 machine hours are available. A Treadmill requires 6 machine hours per unit, while an Elliptical Trainer requires 2.5 machine hours per unit.
Required:
a. How many units of Treadmills and Elliptical Trainers should Ramos produce?
b. What will be the maximum possible contribution margin?

Correct Answer:

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a.CM/hr for Treadmills: ($300 ? $160)/6 ...

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