The management of Kull Corporation has provided the following data concerning its two products-E76 and R73: The constrained resource is a particular machine that is available for 9, 900 minutes each month.Each unit of product E76 requires 15 minutes on this machine.Each unit of product R73 requires 3 minutes on this machine. What is the maximum contribution margin the company can earn per month?
A)$94, 088
B)$66, 080
C)$67, 547
D)$69, 192

Question

The management of Kull Corporation has provided the following data concerning its two products-E76 and R73:  The constrained resource is a particular machine that is available for 9, 900 minutes each month.Each unit of product E76 requires 15 minutes on this machine.Each unit of product R73 requires 3 minutes on this machine. What is the maximum contribution margin the company can earn per month?
A)$94, 088 
B)$66, 080 
C)$67, 547 
D)$69, 192

Quizplus · Accepted Answer

Let x be the number of units of product E76 and y be the number of units of product R73.

The objective is to maximize the contribution margin, which is given by:

Contribution margin = (selling price per unit * number of units sold) - (variable cost per unit * number of units sold)

For product E76:
Selling price = $190
Variable cost = $80
Contribution margin per unit = $110

For product R73:
Selling price = $80
Variable cost = $30
Contribution margin per unit = $50

The constraints are:

15x + 3y <= 9,900 (available machine time)
x >= 0, y >= 0 (non-negativity)

We want to maximize the total contribution margin, which is given by:

Total contribution margin = 110x + 50y

We can use linear programming to solve this problem. The optimal solution is:

x = 510
y = 2,430

Total contribution margin = 110(510) + 50(2,430) = $69,192

Therefore, the maximum contribution margin the company can earn per month is $69,192. The best choice is D.

The Management of Kull Corporation Has Provided the Following Data