Problem 3

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Sparkle Products, a Christmas ornament manufacturer, operates at capacity. Constrained by machine time (200hrs/month), the company decides to drop the most unprofitable of its three product lines. The accounting department came up with the following data from last years operations:

Red Green Blue

Machine Time per Unit 4.0 Hour 1.6 Hours 0.8 Hours

Selling Price per Unit $75.00 $29.00 $18.00

Less Variable Costs per Unit 32.00 18.00 12.00

Contribution Margin $38.00 $11.00 $6.00

Required: Which line should Sparkle Products drop? Provide supporting calculations and include a brief write explaining to the team why (Hint: Use table to compute the contribution per machine hour because machine time is the constraint.)