6. Optimizing Product Mix. California Products Company has the capability of producing and selling three products. Each product has an annual demand potential (at current pricing and promotion levels), a variable contribution, and an annual fixed cost. The fixed cost can be avoided if the product is not produced at all. This information is summarized as follows: Product Demand Contribution Fixed Cost 290,000 $1.20 $60,000 200,000 1.80 200,000 50,000 2.30 55,000 I J K Each product requires work on three machines. The standard productivities and capacities are as follows: Hours per 1,000 Units Hours Available Machine Product I Product J Product K 3.205 3.846 7.692 2.747 4.808 6.410 1.923 3.205 9.615 A B C 1,900 1,900 1,900 a. Determine which products should be produced, and how much of each should be produced, in order to maximize profit contribution from these operations. b. Suppose the demand potential for product K were doubled. What would be the maximum profit contribution?

6. Optimizing Product Mix. California Products Company has the capability of producing and selling three products. Each product has an annual demand potential (at current pricing and promotion levels), a variable contribution, and an annual fixed cost. The fixed cost can be avoided if the product is not produced at all. This information is summarized as follows: Product Demand Contribution Fixed Cost 290,000 $1.20 $60,000 200,000 1.80 200,000 50,000 2.30 55,000 I J K Each product requires work on three machines. The standard productivities and capacities are as follows: Hours per 1,000 Units Hours Available Machine Product I Product J Product K 3.205 3.846 7.692 2.747 4.808 6.410 1.923 3.205 9.615 A B C 1,900 1,900 1,900 a. Determine which products should be produced, and how much of each should be produced, in order to maximize profit contribution from these operations. b. Suppose the demand potential for product K were doubled. What would be the maximum profit contribution?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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6. Optimizing Product Mix. California Products Company has the capability of producing and selling three products. Each
product has an annual demand potential (at current pricing and promotion levels), a variable contribution, and an annual
fixed cost. The fixed cost can be avoided if the product is not produced at all. This information is summarized as follows:
Product Demand Contribution Fixed Cost
$60,000
200,000
55,000
|
A
B
C
J
K
Each product requires work on three machines. The standard productivities and capacities are as follows:
Hours per 1,000 Units
Hours Available
Machine Product I Product J Product K
7.692
6.410
9.615
290,000 $1.20
200,000 1.80
50,000 2.30
3.205
2.747
1.923
3.846
4.808
3.205
1,900
1,900
1,900
a. Determine which products should be produced, and how much of each should be produced, in order to maximize profit
contribution from these operations.
b. Suppose the demand potential for product K were doubled. What would be the maximum profit contribution?

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