Multiple Product Choice: Girth, Inc., makes two kinds of men's suede leather belts. Belt A is a

Question:

Multiple Product Choice: Girth, Inc., makes two kinds of men's suede leather belts. Belt A is a high-quality belt, while belt B is of somewhat lower quality. The company earns a contribution margin of $7 for each unit of belt A that is sold and $2 for each unit sold of belt B. Each unit (belt) of type A requires twice as much manufacturing time as is required for a unit of type B. Further, if only belt B is made. Girth has the capacity to manufacture 1, 000 units per day. Suede leather is purchased by Girth under a long- term contract that makes available to Girth enough leather to make 800 belts per day (A and B combined). Each belt uses the same amount of suede leather. Belt A requires a fancy buckle, of which only 400 per day are available. Belt B requires a different (plain) buckle, of which 700 per day are available. The demand for the suede leather belts (A or B) is such that Girth can sell all that it produces.

Required:

a. Construct a graph to determine how many units of belt A and belt B should be produced to maximize daily profits.

b. Assume the same facts as above except that the sole supplier of buckles for belt A informs Girth, Inc.. that it will be unable to supply more than 100 fancy buckles per day. How many units of each of the two belts should be produced each day to maximize profits'?

c. Assume the same facts as in requirement fb) except that Texas Buckles, Inc., could supply Girth. Inc., with the additional fancy buckles it needs. The price would be $3.50 more than Girth, Inc., is paying for such buckles. How many, if any, fancy buckles should Girth. Inc., buy from Texas Buckles. Inc.? Explain how you determined your answer.

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Related Book For  book-img-for-question

Cost Accounting

ISBN: 9780256069198

3rd Edition

Authors: Edward B. Deakin, Michael Maher

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