A Manager Must Decide on the Mix of Products to Produce

question 4

Essay

A manager must decide on the mix of products to produce for the coming week. Product A requires three minutes per unit for molding, two minutes per unit for painting, and one minute for packing. Product B requires two minutes per unit for molding, three minutes for painting, and two minutes per unit for packing. There will be 600 minutes available for molding, 600 minutes for painting, and 480 minutes for packing. Both products have contributions of $1.50 per unit. Answer the following questions; base your work on the solution panel provided.
(a) What combination of A and B will maximize contribution?
(b) What is the maximum possible contribution?
(c) Are any resources not fully used up? Explain.

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Definitions:

Units of Production

A depreciation method that allocates the original cost of an asset over its total estimated production capacity.

Direct Materials Cost Variance

The difference between the actual cost of direct materials used in production and the standard cost of those materials.

Direct Materials Quantity Variance

The difference between the actual amount of direct materials used in production and the expected amount, based on standards, multiplied by the standard cost per unit.

Variable Costs

Expenses that fluctuate in direct proportion to the amount of production or sales, including items like labor and materials.