Bandy Corporation owns a machine that manufactures lawn game sets.Production time for the croquet set is 10 units per hour and for the volleyball set is 8 units per hour.The machine's capacity is 1,500 hours per year.Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 4,000 croquet sets and 10,000 volleyball sets.Selling prices and variable costs per unit are shown below.Based on this information,what is Bandy Corporation's most profitable sales mix? $\begin{array}{lcc}
& \text { Croquet Set } & \text { Volleyball Game } \
\text { Selling price per unit }
& \$ 75 & \$ 62 \
\text { Variable costs per unit } & 42 & 25
\end{array}$
A)15,000 croquet sets.
B)12,000 volleyball sets.
C)4,000 croquet sets and 10,000 volleyball sets.
D)4,000 croquet sets and 8,800 volleyball sets.
E)2,500 croquet sets and 10,000 volleyball sets.

Question

Bandy Corporation owns a machine that manufactures lawn game sets.Production time for the croquet set is 10 units per hour and for the volleyball set is 8 units per hour.The machine's capacity is 1,500 hours per year.Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 4,000 croquet sets and 10,000 volleyball sets.Selling prices and variable costs per unit are shown below.Based on this information,what is Bandy Corporation's most profitable sales mix? $\begin{array}{lcc}
 & \text { Croquet Set } & \text { Volleyball Game } \
\text { Selling price per unit }
& \$ 75 & \$ 62 \
\text { Variable costs per unit } & 42 & 25
\end{array}$
A)15,000 croquet sets.
B)12,000 volleyball sets.
C)4,000 croquet sets and 10,000 volleyball sets.
D)4,000 croquet sets and 8,800 volleyball sets.
E)2,500 croquet sets and 10,000 volleyball sets.

Quizplus · Accepted Answer

The most profitable sales mix is determined by maximizing the contribution margin per hour. The contribution margin per unit for croquet sets is $33 ($75 - $42) and for volleyball sets is $37 ($62 - $25). The contribution margin per hour for croquet sets is $330 (10 units x $33) and for volleyball sets is $296 (8 units x $37). Therefore, croquet sets should be produced up to their maximum demand of 4,000 units, using 400 hours (4,000 units / 10 units per hour). The remaining 1,100 hours (1,500 total hours - 400 hours) should be used to produce volleyball sets, resulting in 8,800 units (1,100 hours x 8 units per hour).

Bandy Corporation Owns a Machine That Manufactures Lawn Game Sets