Table 5.1 A Company Makes Four Products That Have the Following Characteristics

question 37

Multiple Choice

Table 5.1
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 5.1. 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:

Revenue

The overall revenue produced by a corporation through its primary business of selling goods or services.

Consumer Surplus

The variance between the price consumers are prepared to pay for a product or service and the price they actually incur.

Value

The importance, worth, or usefulness of something, often expressed in monetary terms but can also represent sentimental or intrinsic worth.

Sales Tax

A tax levied on the sale of goods and services, typically calculated as a percentage of the purchase price and collected by the retailer.