Boylan Company manufactures two products-toaster ovens and bread machines.The following data are available: $$\begin{array} { | l | r | r | }
\hline & \text { Toaster Ovens } & \text { Bread Machines } \
\hline \text { Sales price } & \$ 70 & \$ 150 \
\hline \text { Variable costs } & \$ 40 & \$ 70 \
\hline
\end{array}$$ Boylan can manufacture six toaster ovens per machine hour and four bread machines per machine hour.Boylan's production capacity is 1,800 machine hours per month.Marketing limitations indicate that Boylan can sell a maximum of 5,000 toasters and 4,000 bread machines per month.Which product and how many units should the company produce in a month to maximize profits? (Round machine hour per unit to two decimal places and your final answer to the nearest whole dollar.)

Question

Boylan Company manufactures two products-toaster ovens and bread machines.The following data are available: $$\begin{array} { | l | r | r | } 
\hline & \text { Toaster Ovens } & \text { Bread Machines } \
\hline \text { Sales price } & \$ 70 & \$ 150 \
\hline \text { Variable costs } & \$ 40 & \$ 70 \
\hline
\end{array}$$ Boylan can manufacture six toaster ovens per machine hour and four bread machines per machine hour.Boylan's production capacity is 1,800 machine hours per month.Marketing limitations indicate that Boylan can sell a maximum of 5,000 toasters and 4,000 bread machines per month.Which product and how many units should the company produce in a month to maximize profits? (Round machine hour per unit to two decimal places and your final answer to the nearest whole dollar.)

Quizplus · Accepted Answer

Boylan can produce 6 toaster ovens or 4 bread machines per machine hour. The contribution margin per machine hour is $18 for toaster ovens ($70 sales price - $40 variable cost) and $30 for bread machines ($150 sales price - $70 variable cost). To maximize profits, Boylan should produce the product with the higher contribution margin per machine hour, which is bread machines. Boylan can produce 1,800 machine hours per month, so it can produce 7,200 bread machines (1,800 machine hours x 4 bread machines per machine hour). However, Boylan can only sell a maximum of 4,000 bread machines per month. Therefore, Boylan should produce 4,000 bread machines and 4,800 toaster ovens (1,800 machine hours - 4,000 bread machines x 4 machine hours per bread machine / 6 machine hours per toaster oven).

Boylan Company Manufactures Two Products-Toaster Ovens and Bread Machines Boylan Can Manufacture Six Toaster Ovens Per Machine Hour and Data