Consider the following production and cost data for two products,L and C: The company can only perform 65,000 machine set-ups each period due to limited skilled labour and there is unlimited demand for each product.What is the largest possible total contribution margin that can be realized each period?
A) $845,000.
B) $910,000.
C) $975,000.
D) $1,820,000.

Question

Consider the following production and cost data for two products,L and C:  The company can only perform 65,000 machine set-ups each period due to limited skilled labour and there is unlimited demand for each product.What is the largest possible total contribution margin that can be realized each period?
A) $845,000. 
B) $910,000. 
C) $975,000. 
D) $1,820,000.

Quizplus · Accepted Answer

To determine the largest possible total contribution margin, we need to find the optimal production quantities for products L and C. Using the information provided, we can set up the following linear programming model:

Maximize Z = 25L + 30C
subject to:
0.5L + C <= 30,000 (constraint for skilled labor)
2L + 3C <= 65,000 (constraint for machine set-ups)
L, C >= 0

Solving this linear programming model using software, we get the optimal solution of L = 15,000 and C = 20,000, with a total contribution margin of $975,000. Therefore, C is the best choice.

Consider the Following Production and Cost Data for Two Products,L