Question

Calculator Santorino Company produces two models of a component, Model K-3 and Model P-4. The unit contribution margin for Model K-3 is $6; the unit contribution margin for Model P-4 is $14. Each model must spend time on a special machine. The firm owns two machines that together provide 4,000 hours of machine time per year. Model K-3 requires 15 minutes of machine time; Model P-4 requires 30 minutes of machine time. What is the amount of machine time for model P-4 in terms of percentage of a machine hour?

Answer 1

Answer and Explanation:

1. 5,000

2. 5,500

Working;

Machine Hour available : 4,000

Product P-4 Has higher contribution margin, so it must be produced maximum.

Maximum demand for Product P-4 = 5,500 Units

Time required by each Unit = 30 Min.

Total Hours required for 5,500 Units, 5500 / 2 = 2,750 Hours

Remaning hours will be alloted to K-3.

Each unit of K-3 require 15 Min. , So total of 4 Units in an hour.

Total units produced = 1,250 x 4 = 5,000 Units.