Thermic co produce 2 product lines Warm o Martic and Thermor

Thermic co produce 2 product lines: Warm o Martic and Thermorobot. The manager are deciding which product line to emphasize and to make decision they assembly the following data: Warm o Matic: Sales price per unit: $65; Variable expenses per unit $35; contribution margin per unit $30; monthly market demand 19000. Thermorobot: sales price per unit $160; Variable expenses per unit $100; contribution margin per unit $60; monthly market demand 6500. The factory has a production capacity of 1500 hours per months. The plant can manufacture 20 Warm o Matics or 8 Thermorobot per machine hour. What is the product mix that maximizes Thermic Co s month,y operating profit?

Solution

Warm o Martic Thermorobot Contribution margin per unit 30 60 Machine hour per unit 0.05 0.125 Contribution margin per machine hour 600 480 Therefore it is profitable to produce Warm o Martic first Machine hours required to satisfy Warm o Martic monthly demand =(19000*0.05)= 950 Machine hours for Thermobot monthly demand=(1500-950)=550 Production for Thermobot = 550/0.125= 4400 Product mix: Warm o Martic 19000 Thermorobot 4400