Little Kitchens is a company that builds and sells play kitchens. In the past, the company was simply a parts supplier for other toy companies. Recently, however, they have been attempting to break into the market with their own personal brand as well, but to ensure a steady revenue stream, Little Kitchens is still producing two parts to sell to other companies.
After expanding their production operations, Little Kitchens has seen great success in sales. However, they are currently producing at 80% capacity (of total floor space occupied), and are unsure whether to devote that extra capacity to producing more of their own play kitchens or to simply increase the number of parts they supply to other companies. Following is information regarding the three options management is considering:
Little Kitchens factory has a total of 20,000 square feet of floor space.
Which option would return the highest marginal amount per month, and how much would it be?

Question

Little Kitchens is a company that builds and sells play kitchens. In the past, the company was simply a parts supplier for other toy companies. Recently, however, they have been attempting to break into the market with their own personal brand as well, but to ensure a steady revenue stream, Little Kitchens is still producing two parts to sell to other companies. 
After expanding their production operations, Little Kitchens has seen great success in sales. However, they are currently producing at 80% capacity (of total floor space occupied), and are unsure whether to devote that extra capacity to producing more of their own play kitchens or to simply increase the number of parts they supply to other companies. Following is information regarding the three options management is considering:
  Little Kitchens factory has a total of 20,000 square feet of floor space.
Which option would return the highest marginal amount per month, and how much would it be?

Quizplus · Accepted Answer

The Answer of Little Kitchens is a company that builds and sells play kitchens. In the past, the company was simply a parts supplier for other toy companies. Recently, however, they have been attempting to break into the market with their own personal brand as well, but to ensure a steady revenue stream, Little Kitchens is still producing two parts to sell to other companies. 
After expanding their production operations, Little Kitchens has seen great success in sales. However, they are currently producing at 80% capacity (of total floor space occupied), and are unsure whether to devote that extra capacity to producing more of their own play kitchens or to simply increase the number of parts they supply to other companies. Following is information regarding the three options management is considering:
  Little Kitchens factory has a total of 20,000 square feet of floor space.
Which option would return the highest marginal amount per month, and how much would it be?

Little Kitchens Is a Company That Builds and Sells Play