Answer:
Comfy Fit Company
a. The contribution margin per hour of machine time for the Swoop is:
= $50.
b. The contribution margin per hour of machine time for the Rufus sweatshirts is:
= $30.
c. The optimal mix of sweatshirts that maximizes profitability is 40,000 Swoop sweatshirts and 6,000 Rufus sweatshirts.
d. The total contribution margin earned for the optimal mix is:
= $2,180,000.
Explanation:
a) Data and Calculations:
Machine hours available = 7,000 hours (1,000 * 7)
Swoop Rufus
Contribution margins $5 $15
Time required per unit 6 min 30 min
Time required per unit in hours 0.10 hr 0.5 hrs
Contribution per hour $50 $30
Optimal product mix is to produce all of Swoop's 40,000 units first and then to use the remaining machine hours (3,000) to produce Rufus sweatshirts.
This will take 4,000 hours (40,000 * 0.10)
This leaves 3,000 hours for Rufus (7,000 - 4,000)
This means that only 6,000 (3,000/0.5) of Rufus can be produced
The total contribution margin for the optimal mix:
= ($50 * 40,000) + ($30 * 6,000)
= $2,000,000 + 180,000
= $2,180,000
