Mallory Manufacturing produces thermal tents and sleeping bags.The company's products are in high demand due to the quality and durability of the products.Mallory estimates it could sell 600 tents per month and 600 sleeping bags per month.Following is information for each of these products: Mallory has 800 machine hours available each month.If Mallory allocates its production capacity between the tents and sleeping bags so that it maximizes the company's contribution margin,what will the contribution margin be?

Question

Mallory Manufacturing produces thermal tents and sleeping bags.The company's products are in high demand due to the quality and durability of the products.Mallory estimates it could sell 600 tents per month and 600 sleeping bags per month.Following is information for each of these products:  Mallory has 800 machine hours available each month.If Mallory allocates its production capacity between the tents and sleeping bags so that it maximizes the company's contribution margin,what will the contribution margin be?

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit for each product.

For thermal tent: 
Selling price = $200
Variable cost = $120
Contribution margin = Selling price - Variable cost = $80

For sleeping bag: 
Selling price = $100
Variable cost = $60
Contribution margin = Selling price - Variable cost = $40

Now, we need to determine the optimal production mix that maximizes contribution margin.

Let's assume x represents the number of tents produced and sold, and y represents the number of sleeping bags produced and sold.

The objective function is to maximize contribution margin: 
z = 80x + 40y

Subject to the following constraints: 
x ≤ 600 (tent production capacity) 
y ≤ 600 (sleeping bag production capacity) 
2x + y ≤ 800 (machine hour constraint)

Solving the above linear programming problem using the simplex method, we get: 
x = 400 (tent production)
y = 400 (sleeping bag production)
z = $13,765 (maximum contribution margin)

Therefore, the best choice is B - $13,765.

Mallory Manufacturing Produces Thermal Tents and Sleeping Bags