A company sells two products with information as follows:
$$\begin{array} { | l | r | r | }
\hline & { \text { A } } & { \text { B } } \
\hline \text { Price per unit } & \$ 10.00 & \$ 16.00 \
\hline \text { Variable cost per unit } & \$ 8.00 & \$ 11.00 \
\hline
\end{array}$$
Products are made by machine. 4 units of Product A can be made with one machine hour and 2 units of Product B can be made with one machine hour. The company has a maximum of 2,000 machine hours available per month.
-The company can sell up to 5,000 units of Product A per month, and up to 2,000 units of Product B for the month. What is the optimum product mix given the stated constraints?

Question

A company sells two products with information as follows:
$$\begin{array} { | l | r | r | } 
\hline & { \text { A } } &  { \text { B } } \
\hline \text { Price per unit } & \$ 10.00 & \$ 16.00 \
\hline \text { Variable cost per unit } & \$ 8.00 & \$ 11.00 \
\hline
\end{array}$$
Products are made by machine. 4 units of Product A can be made with one machine hour and 2 units of Product B can be made with one machine hour. The company has a maximum of 2,000 machine hours available per month. 
-The company can sell up to 5,000 units of Product A per month, and up to 2,000 units of Product B for the month. What is the optimum product mix given the stated constraints?

Quizplus · Accepted Answer

The contribution margin per machine hour is higher for Product A ($8) than for Product B ($10). Therefore, maximizing production of Product A within the constraints will yield the highest profit.

A Company Sells Two Products with Information as Follows Products Are Made by Machine