JK Company can sell all of the plush and supreme products it can produce,but it has limited production capacity.It can produce 4 plush units per hour or 2 supreme units per hour,and it has 2,000 production hours available.Contribution margin per unit is $214 for the plush product and $300 for the supreme product.What is the total contribution margin if JK chooses the most profitable sales mix?
A)$824,000.
B)$1,424,000.
C)$1,648,000.
D)$1,712,000.
E)$2,400,000.

Question

Quizplus · Accepted Answer

To maximize profit, JK Company should focus on the product with the highest contribution margin per hour. The contribution margin per hour for plush is 4 units * $214 = $856. For supreme, it's 2 units * $300 = $600. Since plush has a higher contribution margin per hour, the company should produce plush for all 2,000 hours. Thus, the total contribution margin is 4 units/hour * 2,000 hours * $214/unit = $1,712,000.

JK Company Can Sell All of the Plush and Supreme