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

question 108

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 bottleneck method, what is the optimal product mix (consider variable costs only-overhead is not included in this profit calculation) ?

• A) 71 A, 80B, 80C, 80 D
• B) 80A, 72B, 80C, 80D
• C) 80A, 80B, 60C, 80D
• D) 80A, 80B, 80C, 70D

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Definitions:

Dividend Payout Ratio

The dividend payout ratio is the fraction of net income a firm pays to its shareholders in dividends, expressed as a percentage of the company's total net income.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Profit Margin

A financial metric that measures the percentage of revenue remaining after all expenses have been deducted from sales.

External Financing Need

The requirement for funds from sources outside the business, such as loans or equity financing, to support operations or growth.