Ridley Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell Lamp
The following per unit data are available:
Bedford Lamp Lowell Lamp
Sales price $25 $35
Variable costs $17 $23
Machine hours required for one lamp 2 4
Total fixed costs are $40,000. Marketing data indicate that the company can sell up to 6,000 units of the Bedford Lamp and up to 6,000 units of the Lowell Lamp. Machine hour capacity is 25,000 hours per year. Which product mix will deliver the optimum operating income?
A) 6,000 Bedford Lamps and 6,000 Lowell Lamps
B) 3,000 Bedford Lamps and zero Lowell Lamps
C) 6,000 Bedford Lamps and 3,250 Lowell Lamps
D) 3,000 Bedford Lamps and 1,500 Lowell Lamps
C .C)
Bedford Lowell
Sales price $25 $35
Variable costs 17 23
Contribution margin $8 $12
Machine hour per unit 2 4
Contribution margin per machine hour $4 $3
Ranking 1 2
No. of Hours
units Required
Total 25,000
Bedford 6,000 12,000
Lowell 3,250 13,000
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