Question

Bricktan Inc. makes three products, basic, classic, and deluxe. The maximum Bricktan can sell is 75,000 units of basic, 420,000 units of classic, and 120,000 units of deluxe. Bricktan has limited production capacity of 90,000 hours. It can produce 10 units of basic, 8 units of classic, and 4 units of deluxe per hour. Contribution margin per unit is $15 for the basic, $25 for the classic, and $55 for the deluxe. What is the total contribution margin if Bricktan chooses the most profitable sales mix

Answer 1

Answer:

Bricktan Inc.

The total contribution margin if Bricktan chooses the most profitable sales mix is:

= $8,775,000.

Explanation:

a) Data and Calculations:

                                                     Basic        Classic       Deluxe     Total

Maximum sales                        75,000      420,000     120,000

Production hours available = 90,000

Units per hour                               10              8                  4

Hours required to meet sales  7,500        52,500       30,000    90,000 hrs

Contribution margin per unit    $15            $25            $55

Contribution margin per hour   $150         $200         $220

Total contribution margin $1,125,000  $1,050,000  $6,600,000  $8,775,000