Robinsons Company makes three products, all of which require the use of a special machine. Only 200 hours of machine time are available per month. Data for the three products are as follows. Winston can sell as much of any product as it can make. Product 1 Product 2 Product 3 Selling Price P12 P16 P21 Variable Cost 7 8 10 Contribution Margin P5 P8 P11 Machine time required in min. 6 10 15 Required: Which product should be produced to maximize profits? Given the capacity constraint, determine which product the company should make and what total monthly contribution margin the company would earn by making only that product. How much would the selling price of the next most profitable (per machine hour) product have to rise to be as profitable as the product you selected in item 2?
Robinsons Company makes three products, all of which require the use of a special machine. Only 200 hours of machine time are available per month. Data for the three products are as follows. Winston can sell as much of any product as it can make. Product 1 Product 2 Product 3 Selling Price P12 P16 P21 Variable Cost 7 8 10 Contribution Margin P5 P8 P11 Machine time required in min. 6 10 15 Required: Which product should be produced to maximize profits? Given the capacity constraint, determine which product the company should make and what total monthly contribution margin the company would earn by making only that product. How much would the selling price of the next most profitable (per machine hour) product have to rise to be as profitable as the product you selected in item 2?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Robinsons Company makes three products, all of which require the use of a special machine. Only 200 hours of machine time are available per month. Data for the three products are as follows. Winston can sell as much of any product as it can make.
|
Product 1 |
Product 2 | Product 3 | |
| Selling Price | P12 | P16 | P21 |
| Variable Cost | 7 | 8 | 10 |
| Contribution Margin | P5 | P8 | P11 |
| Machine time required in min. | 6 | 10 |
15 |
Required:
- Which product should be produced to maximize profits?
- Given the capacity constraint, determine which product the company should make and what total monthly contribution margin the company would earn by making only that product.
- How much would the selling price of the next most profitable (per machine hour) product have to rise to be as profitable as the product you selected in item 2?
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