A company manufactures three products. The following information is obtained in respect of nextmonth’s budgeted production.product X product Y product Zcontribution per unit $7 $6 $8contribution per kilo $3 $4 $6kilos of material requiredfor production400 600 1000The company has been advised that only 1800 kilos of material will be available for productionnext month.What is the maximum contribution the company can earn?A $9000 B $9600 C $13 000 D $13 200
Question
A company manufactures three products. The following information is obtained in respect of nextmonth’s budgeted production.product X product Y product Zcontribution per unit 6 3 6kilos of material requiredfor production400 600 1000The company has been advised that only 1800 kilos of material will be available for productionnext month.What is the maximum contribution the company can earn?A 9600 C 13 200
Solution
To determine the maximum contribution the company can earn, we need to calculate the contribution for each product based on the available material.
First, let's calculate the maximum number of units that can be produced for each product using the available material:
For product X: Maximum units = available material / kilos of material required for production Maximum units = 1800 / 400 Maximum units = 4.5 units
For product Y: Maximum units = available material / kilos of material required for production Maximum units = 1800 / 600 Maximum units = 3 units
For product Z: Maximum units = available material / kilos of material required for production Maximum units = 1800 / 1000 Maximum units = 1.8 units
Next, let's calculate the contribution for each product:
For product X: Contribution = contribution per unit * maximum units Contribution = 31.50
For product Y: Contribution = contribution per unit * maximum units Contribution = 18.00
For product Z: Contribution = contribution per unit * maximum units Contribution = 14.40
Finally, let's calculate the maximum contribution the company can earn by summing up the contributions for each product:
Maximum contribution = Contribution for product X + Contribution for product Y + Contribution for product Z Maximum contribution = 18.00 + 63.90
Therefore, the maximum contribution the company can earn is $63.90.
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