Question
T&G Co. manufactures three types of computer desks. The income statement for the three products and the whole company is shown below: Product A Product
T&G Co. manufactures three types of computer desks. The income statement for the three products and the whole company is shown below:
Product A | Product B | Product C | Total | ||||||
Sales | $75,000 | $95,000 | $105,000 | $275,000 | |||||
Variable costs | 40,000 | 60,000 | 95,000 | 195,000 | |||||
Fixed costs | 22,400 | 16,000 | 16,000 | 54,400 | |||||
Total costs | 62,400 | 76,000 | 111,000 | 249,400 | |||||
Operating income (loss) | $12,600 | $19,000 | $(6,000 | ) | $25,600 |
The company produces 1,000 units of each product. The companys capacity is 17,000 machine hours. The machine hours for each product are 7 hours for Product A, 5 hours for Product B, and 5 hours for Product C. Fixed costs are allocated based on machine hours.
a) The company has a contract that requires it to supply 430 units of each product to a customer. The total market demand for a single product is limited to 1,500 units. How many units of each product should the company manufacture to maximize its total contribution margin including the contract?
T&G Co. should manufacture | |||
Product A | units | ||
Product B | units | ||
Product C | units |
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