Table 7.5 A Company Makes Four Products That Have the Following Characteristics

question 130

Multiple Choice

Table 7.5
A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of labor to produce;Product B sells for $75 but needs $30 of materials and $15 of labor to produce;Product C sells for $100 but needs $50 of materials and $30 of labor to produce;Product D sells for $150 but needs $75 of materials and $40 of labor to produce.The processing requirements for each product on each of the four machines are shown in the table. Work centers W,X,Y,and Z are available for 40 hours per week and have no setup time when switching between products.Market demand for each product is 80 units per week.In the questions that follow,the traditional method refers to maximizing the contribution margin per unit for each product,and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 7.5.Using the traditional method,what is the profit if the company manufactures the optimal product mix (consider variable costs only-overhead is not included in this profit calculation) ?

• A)less than or equal to $8,100
• B)greater than $8,100 but less than or equal to $8,300
• C)greater than $8,300 but less than or equal to $8,500
• D)greater than $8,500

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Definitions:

Seasonal Factor

Variations in demand, supply, or other business indicators that occur at specific times of the year.

Forecasting Method

A process used to predict future values based on past and present data, often utilized in finance, weather prediction, and supply chain management.

Systematic Component

The part of a process or series that can be directly linked to specific casual factors, showing predictable patterns over time.

Random Component

In statistical models, the part of variation that cannot be attributed to any identifiable factors and appears without a discernible pattern.