Table 5.1
A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of labor to produce; Product B sells for $75 but needs $30 of materials and $15 of labor to produce; Product C sells for $100 but needs $50 of materials and $30 of labor to produce; Product D sells for $150 but needs $75 of materials and $40 of labor to produce. The processing requirements for each product on each of the four machines are shown in the table.

Work centers W, X, Y, and Z are available for 40 hours per week and have no setup time when switching between products. Market demand for each product is 80 units per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 5.1. Using the traditional method, what is the optimal product mix (consider variable costs only-overhead is not included in this profit calculation)?
A) 71 A, 80B, 80C, 80 D
B) 80A, 72B, 80C, 80D
C) 80A, 80B, 60C, 80D
D) 80A, 80B, 80C, 70D

Question

Table 5.1
A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of labor to produce; Product B sells for $75 but needs $30 of materials and $15 of labor to produce; Product C sells for $100 but needs $50 of materials and $30 of labor to produce; Product D sells for $150 but needs $75 of materials and $40 of labor to produce. The processing requirements for each product on each of the four machines are shown in the table.
  
Work centers W, X, Y, and Z are available for 40 hours per week and have no setup time when switching between products. Market demand for each product is 80 units per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 5.1. Using the traditional method, what is the optimal product mix (consider variable costs only-overhead is not included in this profit calculation)?
A) 71 A, 80B, 80C, 80 D 
B) 80A, 72B, 80C, 80D 
C) 80A, 80B, 60C, 80D 
D) 80A, 80B, 80C, 70D

Quizplus · Accepted Answer

The optimal product mix using the traditional method focuses on maximizing contribution margin per unit, which is calculated by subtracting variable costs from sales price. Option C likely provides the highest contribution margin across all products.

Table 5.1 A Company Makes Four Products That Have the Following Characteristics