Bandy Corporation owns a machine that manufactures lawn game sets. Production time for the croquet set is 10 units per hour and for the volleyball set is 8 units per hour. The machine's capacity is 1,500 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 4,000 croquet sets and 10,000 volleyball sets. Selling prices and variable costs per unit are shown below. Based on this information, what is Bandy Corporation's most profitable sales mix?
A) 15,000 croquet sets.
B) 12,000 volleyball sets.
C) 4,000 croquet sets and 10,000 volleyball sets.
D) 4,000 croquet sets and 8,800 volleyball sets.
E) 2,500 croquet sets and 10,000 volleyball sets.

Question

Bandy Corporation owns a machine that manufactures lawn game sets. Production time for the croquet set is 10 units per hour and for the volleyball set is 8 units per hour. The machine's capacity is 1,500 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 4,000 croquet sets and 10,000 volleyball sets. Selling prices and variable costs per unit are shown below. Based on this information, what is Bandy Corporation's most profitable sales mix? 
A) 15,000 croquet sets. 
B) 12,000 volleyball sets. 
C) 4,000 croquet sets and 10,000 volleyball sets. 
D) 4,000 croquet sets and 8,800 volleyball sets. 
E) 2,500 croquet sets and 10,000 volleyball sets.

Quizplus · Accepted Answer

Croquet hourly contribution margin: $75 − 42 = $33 × 10 units per hour = $330
Volleyball hourly contribution margin: $62 − 25 = $37 × 8 units per hour = $296
Make maximum croquet units: 4,000 units/10 units per hour = 400 hours for 4,000 units
Use remaining hours for volleyball units: 1,500 − 400 = 1,100 hours remaining × 8 per hour = 8,800 units

Bandy Corporation Owns a Machine That Manufactures Lawn Game Sets