Table 5.1 A Company Makes Four Products That Have the Following Characteristics

question 108

Multiple Choice

Table 5.1
A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of labor to produce; Product B sells for $75 but needs $30 of materials and $15 of labor to produce; Product C sells for $100 but needs $50 of materials and $30 of labor to produce; Product D sells for $150 but needs $75 of materials and $40 of labor to produce. The processing requirements for each product on each of the four machines are shown in the table.

Work centers W, X, Y, and Z are available for 40 hours per week and have no setup time when switching between products. Market demand for each product is 80 units per week. In the questions that follow, the traditional method refers to maximizing the contribution margin per unit for each product, and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 5.1. Using the bottleneck method, what is the optimal product mix (consider variable costs only-overhead is not included in this profit calculation) ?

• A) 71 A, 80B, 80C, 80 D
• B) 80A, 72B, 80C, 80D
• C) 80A, 80B, 60C, 80D
• D) 80A, 80B, 80C, 70D

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Definitions:

Industrial Production

A measure of the output of the industrial sector of the economy, encompassing manufacturing, mining, and utilities.

Firm Size

A measure that typically reflects a company's scale of operations, often indicated by its total revenue, assets, or number of employees.

Risk Premium

The risk premium is the extra return above the risk-free rate that investors require to compensate for the risk of holding a risky asset.

Risk Aversion

The tendency of investors to prefer safer investments over riskier ones, indicating their reluctance to take on investments that carry a higher chance of losing value.