The management of Radke Corporation has provided the following data concerning its two products-F74 and E50: The constrained resource is a particular machine that is available for 10,200 minutes each month. Each unit of product F74 requires 7 minutes on this machine. Each unit of product E50 requires 16 minutes on this machine.
-What is the maximum contribution margin the company can earn per month?
A) $70,472
B) $52,088
C) $54,272
D) $49,592

Question

The management of Radke Corporation has provided the following data concerning its two products-F74 and E50:  The constrained resource is a particular machine that is available for 10,200 minutes each month. Each unit of product F74 requires 7 minutes on this machine. Each unit of product E50 requires 16 minutes on this machine.
-What is the maximum contribution margin the company can earn per month?
A) $70,472 
B) $52,088 
C) $54,272 
D) $49,592

Quizplus · Accepted Answer

To find out the optimal production quantities for each product, we can use the following linear programming model:

Maximize:
Contribution margin = 240F74 + 150E50

Subject to:
7F74 + 16E50 ≤ 10,200    (machine constraint)
F74, E50 ≥ 0             (non-negativity constraint)

Solving this model using any linear programming software or Excel Solver, we get the following optimal solution:

F74 = 1,200 units
E50 = 450 units
Contribution margin = $54,272

Therefore, the best choice is to produce 1,200 units of F74 and 450 units of E50, which will result in a maximum contribution margin of $54,272 per month.

The Management of Radke Corporation Has Provided the Following Data