Question 4: Choosing the product mix when capacity is in short supply You have three product lines: Basic, Premium, and Supreme. You have limited capacity of 300 machine hours. You face excess demand for all three products (assume unlimited demand for simplicity).

	Basic	Premium	Supreme
Price per unit	$3,600	$8,400	$12,000
Unit variable cost	$1,200	$2,400	$3,600
Machine hours per unit	1	2	4

A. Compute the CM per unit of capacity (i.e, per machine-hour) for each product: Basic = _______$ per hour Premium = _______$ per hour Supreme = $ ________ per hour B.Which product(s) should you make?

Basic only

Premium only

Make all three products to take advantage of the high demand

Supreme only

How many units of each product should you make? (enter 0 for products that you do not want to make) Basic = ______ units Premium = _______ units Supreme = _________units Hint if you get stuck: You have 300 machine hours.

Note: only the product with the highest CM per machine hour will be produced. The number of units produced is the total capacity (i.e., total available machine hours) divided by machine hours required per unit.