Beauty Tools Corporation makes and sells brushes and combs.It can sell all of either product it can make.The following data are pertinent to each respective product:

Brushes Combs

Units of output per machine hour 8 20

Selling price per unit $12.00 $4.00

Product cost per unit

Direct material $1.00 $1.20

Direct labor 2.00 0.10

Variable overhead 0.50 0.05

Total fixed overhead is $380,000. The company has 40,000 machine hours available for production.What sales mix will maximize profits? A)320,000 brushes and 0 combs B)0 brushes and 800,000 combs C)160,000 brushes and 600,000 combs D)252,630 brushes and 252,630 combs

Question

Beauty Tools Corporation makes and sells brushes and combs.It can sell all of either product it can make.The following data are pertinent to each respective product:

	Brushes	Combs
Units of output per machine hour	8	20
Selling price per unit	$12.00	$4.00
Product cost per unit
Direct material	$1.00	$1.20
Direct labor	2.00	0.10
Variable overhead	0.50	0.05

Total fixed overhead is $380,000. The company has 40,000 machine hours available for production.What sales mix will maximize profits? A)320,000 brushes and 0 combs B)0 brushes and 800,000 combs C)160,000 brushes and 600,000 combs D)252,630 brushes and 252,630 combs

Quizplus · Accepted Answer

To maximize profits, we need to calculate the contribution margin per machine hour for both products and then allocate all available machine hours to the product with the higher contribution margin per machine hour. For brushes:- Contribution margin per unit = Selling price per unit - Direct material - Direct labor - Variable overhead = $12.00 - $1.00 - $2.00 - $0.50 = $8.50- Units of output per machine hour = 8- Contribution margin per machine hour = $8.50 * 8 = $68For combs:- Contribution margin per unit = Selling price per unit - Direct material - Direct labor - Variable overhead = $4.00 - $1.20 - $0.10 - $0.05 = $2.65- Units of output per machine hour = 20- Contribution margin per machine hour = $2.65 * 20 = $53Since brushes have a higher contribution margin per machine hour ($68) than combs ($53), the company should allocate all available machine hours to producing brushes to maximize profits. With 40,000 machine hours available and 8 brushes produced per machine hour, the company can produce 320,000 brushes (40,000 machine hours * 8 brushes per hour). Therefore, the sales mix that will maximize profits is 320,000 brushes and 0 combs.

Beauty Tools Corporation Makes and Sells Brushes and Combs