Auden Makes Three Types of Vitamin Supplements, All of Which

question 76

Essay

Auden makes three types of vitamin supplements, all of which require the use of encapsulating machines that have a capacity of 10,000 hours. Information on the three types (per case) is as follows: $\begin{array}{lrrr}&\text { Basic }&\text { Vita-Stress } & \text { Antioxidant+ }\\\text { Selling price } & \$ 100 & \$ 125 & \$ 160 \\\text { Variable cost } & 50 & 70 & 90 \\\text { Machine hours } & 0.4 & 0.50 & 0.8\end{array}$ Required:
A. Calculate the contribution margin per case for each type.
B. Calculate the contribution margin per hour of machine time for each type.
C. Based on your analysis in requirement B, if the company can sell all that it can make of all of the products, how many of each type should be sold to maximize total contribution margin?

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Definitions:

Free Trade

The absence of artificial (government) barriers to trade among individuals and firms in different nations.

Economic Inefficiency

A situation where resources are not allocated optimally, leading to waste or loss in the potential value of output.

Hollow Corporation

A business model where a company outsources most of its production processes, keeping only core functions such as design, marketing, and branding in-house.

Imports Foreign Goods

The act of bringing goods and services from foreign countries into one's own country for sale.