Silvio Enterprises produces three products, with costs and selling prices as follows: Each product requires a certain number of minutes on the drill press. There is only one drill press available so it is the constraint for this product. Model D7 requires 2 minutes of drill press time, Model B3 requires 1 minute of drill press time, and Model F5 requires 7 minutes of drill press time. In what order should Silvio Enterprises emphasize its products to maximize its contribution margin? (Rank the products in order from most profitable to least profitable.)

Question

Silvio Enterprises produces three products, with costs and selling prices as follows:  Each product requires a certain number of minutes on the drill press. There is only one drill press available so it is the constraint for this product. Model D7 requires 2 minutes of drill press time, Model B3 requires 1 minute of drill press time, and Model F5 requires 7 minutes of drill press time. In what order should Silvio Enterprises emphasize its products to maximize its contribution margin? (Rank the products in order from most profitable to least profitable.)

Quizplus · Accepted Answer

Since there is only one drill press available, we need to prioritize the products based on the amount of drill press time required per unit. Therefore, we start with Model B3 which requires the least amount of drill press time, followed by Model D7 which requires twice the amount of drill press time as Model B3, and finally, Model F5 which requires the most amount of drill press time.

To maximize contribution margin, we should prioritize the products with the highest contribution margin per unit. Based on the given information, we can calculate the contribution margin per unit as follows:

- Model B3: $24 - $12 = $12
- Model D7: $22 - $13 = $9
- Model F5: $28 - $20 = $8

Therefore, the order of prioritization should be Model B3, Model D7, and then Model F5. This is represented by answer choice A.

Silvio Enterprises Produces Three Products, with Costs and Selling Prices