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Q1) Optimal Corporation makes two products, A and B.  Management wishes the product mix to maximize contribution toward fixed costs and profits given existence of constraining resources. Contribution and constraining resources of products are as follows:

  Product A Product B
Contribution margin per unit $9 $8
Machine time per unit 3 hours 6 hours
Supervisory time per unit 2 hours 2 hours

Machine time is limited to 24,000 hours per period, and supervisory time is limited to 12,000 hours per period. 

a) Determine the optimal production mix for products A and B?

b) Compute production mix at each corner point beyond feasible production region (i.e., suppose you could produce at these coordinates)?

c) Management could increase machine time by 6000 hours. Determine maximum expenditure management would be willing to make to expand this constraint?

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  • Category:- Accounting Basics
  • Reference No.:- M919072

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