2. Greenspan Industries produces three types of industrial fertilizer (Alpha05, Beta10, andGamma15) in 500 pound batches. Each type uses a certain amount of a standard mix ofmaterials (at a cost of $3/pound) and a certain amount of nitrogen pellets (at a cost of$5/pound). Data (per batch) for the three types are as follows:Alpha05Beta 10$8,000$ 5,500475 pounds25 pounds$400450 pounds50 pounds$500Selling PriceQuantity of Standard MixQuantity of Nitrogen PelletsVariable Conversion CostsGamma15$ 12,000425 pounds75 pounds$600The demand for all three types of fertilizer is unlimited. The supply of the standard mix ofchemicals is unlimited. The supply of nitrogen pellets is limited to 18,000 pounds. We mustproduce at least 100 batches of each type of fertilizer. Showing your work in an organizedmanner, how many batches of each type of fertilizer should we produce assuming we want touse up the entire supply of nitrogen pellets and maximize operating income? (Hint: consider$CM per unit of the constraint.)

Contribution margin = Sales value - variable cost

Greenspan Industries produces three types of industrial fertilizer (Alpha05, Beta10, and Gamma15) in 500 pound batches. Each type uses a certain amount of a standard mix of materials (at a cost of $3/pound) and a certain amount of nitrogen pellets (at a cost of $5/pound). Data (per batch) for the three types are as follows: Beta 10 $8,000 450 pounds 50 pounds $500 Selling Price Quantity of Standard Mix Quantity of Nitrogen Pellets Variable Conversion Costs Alpha05 $ 5,500 475 pounds 25 pounds $400 Gamma15 $ 12,000 425 pounds 75 pounds $600 The demand for all three types of fertilizer is unlimited. The supply of the standard mix of chemicals is unlimited. The supply of nitrogen pellets is limited to 18,000 pounds. We must produce at least 100 batches of each type of fertilizer. Showing your work in an organized manner, how many batches of each type of fertilizer should we produce assuming we want to use up the entire supply of nitrogen pellets and maximize operating income? (Hint: consider

Greenspan Industries produces three types of industrial fertilizer (Alpha05, Beta10, and Gamma15) in 500 pound batches. Each type uses a certain amount of a standard mix of materials (at a cost of $3/pound) and a certain amount of nitrogen pellets (at a cost of $5/pound). Data (per batch) for the three types are as follows: Beta 10 $8,000 450 pounds 50 pounds $500 Selling Price Quantity of Standard Mix Quantity of Nitrogen Pellets Variable Conversion Costs Alpha05 $ 5,500 475 pounds 25 pounds $400 Gamma15 $ 12,000 425 pounds 75 pounds $600 The demand for all three types of fertilizer is unlimited. The supply of the standard mix of chemicals is unlimited. The supply of nitrogen pellets is limited to 18,000 pounds. We must produce at least 100 batches of each type of fertilizer. Showing your work in an organized manner, how many batches of each type of fertilizer should we produce assuming we want to use up the entire supply of nitrogen pellets and maximize operating income? (Hint: consider

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

2. Greenspan Industries produces three types of industrial fertilizer (Alpha05, Beta10, and
Gamma15) in 500 pound batches. Each type uses a certain amount of a standard mix of
materials (at a cost of $3/pound) and a certain amount of nitrogen pellets (at a cost of
$5/pound). Data (per batch) for the three types are as follows:
Alpha05
Beta 10
$8,000
$ 5,500
475 pounds
25 pounds
$400
450 pounds
50 pounds
$500
Selling Price
Quantity of Standard Mix
Quantity of Nitrogen Pellets
Variable Conversion Costs
Gamma15
$ 12,000
425 pounds
75 pounds
$600
The demand for all three types of fertilizer is unlimited. The supply of the standard mix of
chemicals is unlimited. The supply of nitrogen pellets is limited to 18,000 pounds. We must
produce at least 100 batches of each type of fertilizer. Showing your work in an organized
manner, how many batches of each type of fertilizer should we produce assuming we want to
use up the entire supply of nitrogen pellets and maximize operating income? (Hint: consider
$CM per unit of the constraint.)

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