Sky Mountain Bakery makes doughnuts, cupcakes, and scones that are in high demand by local restaurants and hotels.Following is information for each of these products: Sky Mountain has 2,000 machine hours available each month.Demand for each item exceeds Sky Mountain's capacity to produce the item.In order to maximize the company's total contribution margin, in what sequence should Sky Mountain fill orders for the three products?
A)Scones first, then cupcakes, then doughnuts
B)Doughnuts first, then scones, then cupcakes
C)Cupcakes first, then doughnuts, then scones
D)Scones first, then doughnuts, then cupcakes

Question

Sky Mountain Bakery makes doughnuts, cupcakes, and scones that are in high demand by local restaurants and hotels.Following is information for each of these products:  Sky Mountain has 2,000 machine hours available each month.Demand for each item exceeds Sky Mountain's capacity to produce the item.In order to maximize the company's total contribution margin, in what sequence should Sky Mountain fill orders for the three products?
A)Scones first, then cupcakes, then doughnuts 
B)Doughnuts first, then scones, then cupcakes 
C)Cupcakes first, then doughnuts, then scones 
D)Scones first, then doughnuts, then cupcakes

Quizplus · Accepted Answer

Since demand exceeds capacity for each item, Sky Mountain should prioritize the products with the highest contribution margin per machine hour. According to the information provided, scones have a contribution margin of $4 per unit and take 0.25 machine hours to produce, resulting in a contribution margin of $16 per machine hour. Doughnuts have a contribution margin of $1 per unit and take 0.1 machine hours to produce, resulting in a contribution margin of $10 per machine hour. Cupcakes have a contribution margin of $2 per unit and take 0.2 machine hours to produce, resulting in a contribution margin of $10 per machine hour. Therefore, scones should be produced first since they have the highest contribution margin per machine hour, followed by doughnuts and then cupcakes.

Sky Mountain Bakery Makes Doughnuts, Cupcakes, and Scones That Are