Figure 25-4
the Following Information Is Available for Wilson Trailer

question 25

Multiple Choice

Figure 25-4
The following information is available for Wilson Trailer Company, which sells two products: $$\begin{array} { l c c } & \text { Trailer A } & \text { Trailer B } \\\text { Processing time } & 2 \text { hours } & 4 \text { hours } \\\text { Vinyl cover used } & 16 \text { sq. ft. } & 12 \text { sq. ft. } \\\text { Selling price } & £ 50.00 & £ 80.00 \\\text { Variable cost } & £ 35.00 & £ 50.00 \\\text { Fixed cost } & £ 10.00 & £ 20.00\end{array}$$ There are 100 hours available in the plant and 75 square metres of vinyl available per operating period.
-Refer to Figure 25-4. What is the objective function for maximizing profits?

• A)Maximize £15A + £30B
• B)Maximize £50A + £80B
• C)Maximize £35A + £50B
• D)Minimize £15A + £30B

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Definitions:

Variable Production Costs

Costs that fluctuate directly with the level of output, including materials, labor, and other expenses that vary with production volume.

Fixed Cost

Expenses that remain constant in total regardless of changes in the level of production or sales volume, such as rent, salaries, and insurance.

Contribution Margin Ratio

A financial metric that shows what portion of sales revenue is available to cover fixed costs and generate profit after variable costs have been paid.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance premiums.