Knoxville Manufacturing Company produces X and Y with contribution margins per unit of $10 and $90, respectively. Only 200 labor hours and 400 machine hours are available for production. Time requirements to produce one unit of X and Y are as follows:
What is the objective function to maximize profits for Knoxville Manufacturing Company?
A) Minimize 10X + 90Y
B) Maximize 10X + 90Y
C) Maximize 1X + 2Y
D) Minimize 1X + 2Y

Question

Knoxville Manufacturing Company produces X and Y with contribution margins per unit of $10 and $90, respectively. Only 200 labor hours and 400 machine hours are available for production. Time requirements to produce one unit of X and Y are as follows:
 What is the objective function to maximize profits for Knoxville Manufacturing Company?
A) Minimize 10X + 90Y 
B) Maximize 10X + 90Y 
C) Maximize 1X + 2Y 
D) Minimize 1X + 2Y

Quizplus · Accepted Answer

The objective is to maximize profits, which is equivalent to maximizing the total contribution margin. The contribution margin per unit of X is $10 and per unit of Y is $90, so the objective function to maximize profits is:
Profit = 10X + 90Y

Knoxville Manufacturing Company Produces X and Y with Contribution Margins