Question
Next door, ABC business, Product A sells for $10 per unit. Its variable cost per unit is $2. Product B sells for $22 per unit.
Next door, ABC business, Product A sells for $10 per unit. Its variable cost per unit is $2. Product B sells for $22 per unit. Its variable cost per unit is $16. The plant capacity is 310,000 machine hours. Both products consumes 2 machine hours/ unit, each. Which of the following will provide the best sales mix of Product A and Product B, assuming that the market limitation of Product A is 152,000 units? What will be the overall contribution margin at that optimal level?
150,000 units of Product A, 12,000 units of Product B; Overall CM of $1,250,000 | ||
304,000 units of Product A, 3,000 units of Product B; Overall CM of $1,234,000 | ||
155,000 units of Product A, no units of Product B; Overall CM of $775,000 | ||
10,000 units of Product A, 150,000 units of Product B; Overall CM of $1,200,000 | ||
Some other amount. |
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