Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,400 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,080 units of Product TLX and 4,540 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. $ per unit Product TLX Product MTV Selling price per unit $ 11.50 $ 6.90 Variable costs per unit 3.45 4.14 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,400 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,080 units of Product TLX and 4,540 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. $ per unit Product TLX Product MTV Selling price per unit $ 11.50 $ 6.90 Variable costs per unit 3.45 4.14 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is three units per hour and for Product MTV is four units per hour. The machine’s capacity is 2,400 hours per year. Both products are sold to a single customer who has agreed to buy all of the company’s output up to a maximum of 4,080 units of Product TLX and 4,540 units of Product MTV. Selling prices and variable costs per unit to produce the products follow.
| $ per unit | Product TLX | Product MTV | ||||||
| Selling price per unit | $ | 11.50 | $ | 6.90 | ||||
| Variable costs per unit | 3.45 | 4.14 | ||||||
Determine the company's most profitable sales mix and the contribution margin that results from that sales mix
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