Santorino Company Produces Two Models of a Component, Model K-3

question 123

Multiple Choice

Santorino Company produces two models of a component, Model K-3 and Model P-4.The unit contribution margin for Model K-3 is $6; the unit contribution margin for Model P-4 is $14.Each model must spend time on a special machine.The firm owns two machines that together provide 4,000 hours of machine time per year.Model K-3 requires 15 minutes of machine time; Model P-4 requires 30 minutes of machine time.
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Now suppose that Santorino Company can sell only 5,500 units of each model.How many units of Model K-3 should be produced?

• A) 5,500
• B) 312
• C) 1,250
• D) 2,750
• E) 5,000

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