Esquerra Corporation has provided the following data concerning its two products-T85 and G34: The total amount of the constrained resource available each month is 146,300 grams.Each unit of product T85 requires 19 grams of the constrained resource and each unit of product G34 requires 11 grams.What is the maximum contribution margin the company can earn per month?
A)$1,337,600
B)$1,145,320
C)$1,178,760
D)$1,170,400

Question

Esquerra Corporation has provided the following data concerning its two products-T85 and G34:  The total amount of the constrained resource available each month is 146,300 grams.Each unit of product T85 requires 19 grams of the constrained resource and each unit of product G34 requires 11 grams.What is the maximum contribution margin the company can earn per month?
A)$1,337,600 
B)$1,145,320 
C)$1,178,760 
D)$1,170,400

Quizplus · Accepted Answer

To determine the maximum contribution margin, we need to first determine the maximum number of units of each product that can be produced given the constrained resource of 146,300 grams.

Let x = number of units of T85

Let y = number of units of G34

Our objective is to maximize the contribution margin, which is calculated as follows:

Contribution Margin = (Unit Selling Price - Unit Variable Cost) * Number of Units Sold

For Esquerra Corporation, the unit selling prices and unit variable costs are provided as follows:

Unit Selling Price:
T85 = $240
G34 = $160

Unit Variable Cost:
T85 = $160
G34 = $110

Therefore, the contribution margin per unit is:
T85: $80/unit
G34: $50/unit

We can use the following two constraints to set up the problem:

1. Total constrained resource constraint: 19x + 11y ≤ 146,300
2. Nonnegativity constraint: x ≥ 0, y ≥ 0

To solve this problem, we can use linear programming techniques, such as the simplex method. The optimal solution is x = 4,700 units of T85 and y = 10,900 units of G34, with a maximum contribution margin of $1,178,760.

Therefore, the best choice is C, with a maximum contribution margin of $1,178,760.

Esquerra Corporation Has Provided the Following Data Concerning Its Two