Ask Question
17 April, 06:56

A company produces two products, A and B. It has limited capacity but unlimited demand so it can sell as many of either product as it produces. Product A requires 2 machine hours per unit to produce, and Product B requires 1 machine hour to produce. Product A sells for $6 per unit and has variable costs of $2 per unit; Product B sells for $5 per unit and has variable costs of $2 per unit. What is the most profitable sales mix for the company?

+4
Answers (1)
  1. 17 April, 07:14
    0
    The company should use all of its limited machine hour to produce only product B. This will make it maximize profit

    Explanation:

    Whenever a company is faced with a limiting factor i. e a resource in short supply, the company should allocate the resource to the product with he highest contribution per unit of the scare resource

    Product Cont/unit machine hr / unit cont/hr Ranking

    A 6-2 = $4 per unit 2 hours $2 per hour 2nd

    B 5-2 = $3 per unit 1 hour $3 per hour 1st

    The company should use all of its limited machine hour to produce only product B. This will make it maximize profit
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “A company produces two products, A and B. It has limited capacity but unlimited demand so it can sell as many of either product as it ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers