Question

The multi resource company manufactures two lines of washing machines, regular and deluxe. the contribution margin per unit of a regular model is $110 and for deluxe model is $175. the company has two departments, assembly and testing. the regular model requires 3 hours to assemble, while a deluxe model requires 4 hours. the total time available in assembly is 12,144 hours. in the testing department, it requires 2. 5 hours to test a regular model and 1. 5 hours to test a deluxe model. a total of 6,240 hours of testing time is available. based on this information, the optimum production plan for multi resource is:

Answer 1

Based on this information, the optimum production plan for multi-resource production is 3,036 Deluxe models.

What is the optimum production plan?

The optimum production plan is the production plan that yields the highest level of contribution margin per unit of the limited resource.

Data and Calculations:

                                                  Regular              Deluxe      Total

Contribution margin per unit      $110                  $175

Assembly hours                              3                     4              12,144

Testing hours                               2.5                     1.5           6,240

Limited resource = Assembly hours

Contribution margin per unit of limited

 resource =                          $36.67 ($110/3)   $43.75 ($175/4)

Thus, the optimum production plan is to maximize the contribution margin per unit of the limited resource by producing 3,036 units of the Deluxe Model (12,144/4).

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