Montgomery Company Produces a and B with Contribution Margins Per

question 83

Multiple Choice

Montgomery Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labor hours and 300 machine hours are available for production. Time requirements to produce one unit of A and B are as follows: $\begin{array}{lcc} & \text { Product A } & \text { Product B } \\\text { Labor hours per unit } & 6 & 3 \\\text { Machine hours per unit } & 2 & 5\end{array}$
What is the objective function to maximize profits for Montgomery Company?

• A)Minimize 6A + 3B
• B)Maximize 2A + 5B
• C)Minimize 40A + 30B
• D)Maximize 40A + 30B

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Definitions:

Short Run

A period in economics during which at least one factor of production is fixed in quantity; the opposite of the long run, where all factors of production are variable.

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing firms to adjust all inputs.

Product Differentiation

The strategy of distinguishing a product or service from others in the market to make it more attractive to a specific target market.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for some degree of market power.