Question
Sylvesters Steel Works is a small mill that recycles shredded scrap steel into alloy, coils, steel bars, and wire. SSW starts with a basic stock
Sylvesters Steel Works is a small mill that recycles shredded scrap steel into alloy, coils, steel bars, and wire. SSW starts with a basic stock of shredded scrap steel which is melted and purified via its high-powered electric furnace. The molten metal is then transferred for processing in SSW's Cold Rolling Mill, which is the bottleneck machine in the company's manufacturing process. The Cold Rolling Mill can be operated for only 24,000 minutes per month.
Management has provided you with the following data regarding the companys four primary product lines, and the amount of time (in minutes) that one pound of the product requires in the Cold Rolling Mill.
Alloy | Coils | Steel bars | Wire | |
Contribution margin per pound | $1.40 | $0.45 | $0.98 | $0.75 |
Minutes in the Cold Rolling Mill per pound | 0.10 | 0.03 | 0.35 | 0.30 |
Monthly demand (in pounds) | 93,000 | 146,000 | 17,000 | 29,000 |
Assuming that SSW optimizes its product mix to maximize its contribution margin, what is the company's total contribution margin per month?
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