A Small Firm Makes Three Products,which All Follow the Same

question 89

Essay

A small firm makes three products,which all follow the same three step process,which consists of milling,inspection,and drilling.Product A requires 6 minutes of milling,5 minutes of inspection,and 4 minutes of drilling; product B requires 2.5 minutes of milling,2 minutes of inspection,and 2 minutes of drilling; and product C requires 5 minutes of milling,4 minutes of inspection,and 8 minutes of drilling.The department has 20 hours available during the next period for milling,15 hours for inspection,and 24 hours for drilling.Product A contributes $6.00 per unit to profit,product B contributes $4.00 per unit,and product C contributes $10.00 per unit.Determine the optimum mix of products in terms of maximizing contributions to profits for the next period.

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Definitions:

Bad Debts Expense

An expense reported on a company's income statement, representing the amount of non-collectable accounts receivable during a period.

Credit Sales

Transactions where the customer purchases goods or services on credit, paying the supplier at a later date.

Perpetual Inventory Method

An inventory management system where adjustments to inventory accounts are made continuously as transactions occur.

Bank Credit Card

A payment card issued by a bank allowing cardholders to purchase goods and services on credit.