Colt Company owns a machine that can produce two specialized products. Productio
ID: 2470051 • Letter: C
Question
Colt Company owns a machine that can produce two specialized products. Production time for Product TLX is two units per hour and for Product MTV is four units per hour. The machine's capacity is 2,200 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 3.740 units of Product TLX and 1.650 units of Product MTV. Selling prices and variable costs per unit to produce the products follow. Determine the company's most profitable sales mix and the contribution margin that results from that sales mix. (Round cost per unit answers to 2 decimal places.)Explanation / Answer
Contribution per Machine hr
Particulars
TLX
MTV
Selling Price
12
7.2
Less : Variable Cost per Unit
3.6
4.32
Contribution per unit
8.4
2.88
No hrs for one Unit
2
4
Contribution per hr
4.2
0.72
Rank
I
II
Particulars
TLX
MTV
Contribution per unit
8.4
2.88
No of units per hr
2
4
Contribution per hr
16.8
11.52
Particulars
TLX
MTV
Total
Maximum no of units to be sold
3740
1650
5390
hrs required to produce maximum units
1870
412.5
2282.5
Most Profitable Sales Mix
TLX
MTV
Total
Hours dedicated
1870
330
2200
Units produced
3740
1320
5060
Contribution per unit
8.4
2.88
Total Contribution
31,416.00
3,801.60
35217.6
Particulars
TLX
MTV
Selling Price
12
7.2
Less : Variable Cost per Unit
3.6
4.32
Contribution per unit
8.4
2.88
No hrs for one Unit
2
4
Contribution per hr
4.2
0.72
Rank
I
II