Answer:
the total contribution margin if Bricktan chooses the most profitable sales mix is $27,000,000
Explanation:
It is important to note that the limiting factor identified is the production hours.
<em>Step 1 Calculate Contribution per limiting factor of each product</em>
Basic
1 unit requires 0.1 hours
Contribution per limiting factor = Contribution per unit / Quantity of limiting factor per unit
= $15/0.10
= $150
Classic
1 unit requires 0.125 hours
Contribution per limiting factor = Contribution per unit / Quantity of limiting factor per unit
= $25/0.125
= $200
Deluxe
1 unit requires 0.25 hours
Contribution per limiting factor = Contribution per unit / Quantity of limiting factor per unit
= $55/0.25
= $220
<em>Step 2 Rank the products </em>
1st = Deluxe
2nd = Classic
3rd = Basic
<em>Step 3 Determine the production mix</em>
Product Total hours demanded Balance
Capacity 134,000
Deluxe (230,000×0.25) = 57,500 76,500
Classic (508,000×0.125) = 63,500 13,000
Basic (130,000×0.1) = 13,000 0
<em>Step 4 Calculate total contribution</em>
Deluxe (230,000×$55) = 12,650,000
Classic (508,000×$25) = 12,700,000
Basic (130,000×$15) = 1,650,000
Total = 27,000,000
