Exercise 8-12 Sunland, Inc. produces three types of balloons-small, medium, and

Question

Exercise 8-12 Sunland, Inc. produces three types of balloons-small, medium, and large-with the following characteristics: Small Medium Large $8 $10 Selling price per unit Variable cost per unit Contribution margin per unit Machine hours per unit Demand in units $2 $3 2.4 1,000 570 930 The company has only 2,000 machine hours available each month How many units of each type of balloon should the company make to maximize its total contribution margin? (Round answers to O decimal places, e.g. 5,275.) Units Small Medium Large

Explanation / Answer

8-12)

Calculate unit produced of each product for maximum total contribution margin

8-10) Total relevant cost to make = (5+11+6+4*5300)+10600 = $148400

Net relevant cost to buy = 5300*32 = $169600

No, should not accept the offer

Small Medium Large Contribution margin per unit 2 3 4 Machine hour per unit 1 2.4 3 Contribution margin per machine hour 2 1.25 1.33 Rank 1 3 2

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