A Company Sells Two Products with Information as Follows Products Are Made by Machine

question 14

Multiple Choice

A company sells two products with information as follows:
$\begin{array}{|l|l|l|} \hline & \text { A } & \text { B } \\\hline \text { Price per unit } & \$ 12 & \$ 22 \\\hline \text { Variable cost per unit } & \$ 10 & \$ 10\\\hline \end{array}$

Products are made by machine.4 units of Product A can be made with one machine hour and 2 units of Product B can be made with one machine hour.The company has a maximum of 5000 machine hours available per month.Assume there are no constraints on sales of either product and the company could choose any product mix they wish.What is the maximum amount of contribution margin that the company could earn in a month?

• A) $120,000
• B) $100,000
• C) $10,000
• D) $220,000

Identify the basic principles underlying quantitative management and its application to decision-making and problem-solving.

Understand the concept of open and closed systems in organizations and their interaction with the environment.

Acknowledge the importance of continuous improvement and tactical approaches like network models and simulation in enhancing organizational performance.

Recognize the significance of contingency theory and its application in managerial practices.

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Definitions:

Conversion Cost

The sum of direct labor and factory overhead costs, representing the expenses necessary to convert raw materials into finished goods.

Equivalent Units

A concept in costing used to convert partially completed goods into an equivalent number of fully completed units for inventory valuation.

First-In, First-Out Method

An inventory valuation method where the oldest inventory items are recorded as sold first, leaving the most recently purchased items in inventory.

Conversion Cost

The combined cost of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.