Question
Largo Company has two products that use a common machine. Product A requires 5 machine hours per unit to be produced, Product B requires only
Largo Company has two products that use a common machine. Product A requires 5 machine hours per unit to be produced, Product B requires only 4 machine hours per unit, and the company's productive capacity is limited to 240,000 machine hours. Product A sells for $16 per unit and has variable costs of $6 per unit. Product B sells for $12 per unit and has variable costs of $5 per unit. Assuming the company can sell as many units of either product it produces, what is the maximum total amount of contribution margin Largo can generate by choosing its production schedule optimally?
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