Colt Company owns a machine that can produce two specialized products. Productio
ID: 2573610 • 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 2,400 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 4,080 units of Product TLX and 1,780 units of Product MTV. Selling prices and variable costs per unit to produce the products follow Selling price per unit Variable costs per unit Product TLX 11.50 Product MTV $ 6.90 4.14 3.45 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.) Product TLX Product MTV Contribution margin per unit Contribution margin per production hour Product TLX Product MTV Total Maximum number of units to be sold 4,080 1,780 Hours required to produce maximum units For Most Profitable Sales Mix Product TLX Product MTV Total Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution marginExplanation / Answer
Particulars
Product TLX
Product MTV
Selling Price per Unit
11.5
6.9
Less: Variable costs per Unit
3.45
4.14
Contribution Margin Per Unit
8.05
2.76
Number of Hours required to produce a single Product
0.5
[1/2]
0.25
[1/4]
Contribution margin per production Hour
4.025
[8.05*0.5]
0.69
[2.76*0.25]
Particulars
Product TLX
Product MTV
Total
Maximum number of units to be sold
4080
1780
5860
Hours required to produce maximum units
2040
[4080*0.5]
445
[1780*0.25]
2485
For Most Profitable Sales Mix
Product TLX
Product MTV
Total
Hours dedicated to the production of each product
2040
360
[2400 - 2040]
2400
Units Produced for most profitable sales mix
4080
1440
[360*4]
Contribuiton Margin Per Unit
8.05
2.76
Total Contribution Margin
32844
[4080*8.05]
3974.4
[1440*2.76]
36818
Particulars
Product TLX
Product MTV
Selling Price per Unit
11.5
6.9
Less: Variable costs per Unit
3.45
4.14
Contribution Margin Per Unit
8.05
2.76
Number of Hours required to produce a single Product
0.5
[1/2]
0.25
[1/4]
Contribution margin per production Hour
4.025
[8.05*0.5]
0.69
[2.76*0.25]