A company sells two products with information as follows
A B
Sales price per unit $12.00 $24.00
Variable cost per unit $10.00 $12.00
The products are machine made. Four units of product A can be made with one machine hour and two units of product B can be made with one machine hour. The company has a maximum of 6,000 machine hours available per month. The company can sell up to 18,000 units of product A per month, and up to 3,000 units of product B for the month. What is the optimum product mix to maximize company's operating income?
A) 1,500 units of A and 72,000 units of B
B) 18,000 units of A and 3,000 units of B
C) zero units of A and 3,000 units of B
D) 36,000 units of A and zero units of B
B .B)
A B
Sales price $12.00 $24.00
Variable costs (10.00 ) (12.00 )
Contribution margin $2 $12
Machine hour per unit 0.25 0.5
Contribution margin per machine hour $8 $24
Ranking 2 1
No. of units Hours available
Total 6,000
B 3,000 1,500
A 18,000 4,500
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