Hasselblad Company manufactures two different products, X and Y. The company has 100 pounds of materials and 300 direct labor hours available for production. The time requirements and contribution margins per unit are as follows:
What is the objective function for maximizing profits?
A) Minimize $5X + $6Y
B) Maximize $2X + $3Y
C) Maximize $5X + $6Y
D) Maximize $5X + $3Y

Question

Hasselblad Company manufactures two different products, X and Y. The company has 100 pounds of materials and 300 direct labor hours available for production. The time requirements and contribution margins per unit are as follows:
 What is the objective function for maximizing profits?
A) Minimize $5X + $6Y 
B) Maximize $2X + $3Y 
C) Maximize $5X + $6Y 
D) Maximize $5X + $3Y

Quizplus · Accepted Answer

The objective is to maximize profits, which is represented by the equation: 
Total Contribution Margin = (Contribution Margin per unit of X x Quantity of X) + (Contribution Margin per unit of Y x Quantity of Y) 
Total Contribution Margin = (5X) + (6Y)

Option A aims to minimize the cost of production which is not the objective of the problem.

Option B is incorrect because it is not considering the highest contribution margin of product Y.

Option D gives less weight to Product Ys contribution margin than Option C does.

Hasselblad Company Manufactures Two Different Products, X and Y