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Consider the following production and cost data for two products, L and C: Product LProduct CContribution Margin per Unit$130$120Machine Setups Needed per Unit10 setups8 setupsThe company can only perform 65,000 machine setups each period due to limited skilled labour, and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period? Question 6Answera.$910,000b.$975,000c.$1,820,000d.$845,000

Question

Consider the following production and cost data for two products, L and C: Product LProduct CContribution Margin per Unit130130120Machine Setups Needed per Unit10 setups8 setupsThe company can only perform 65,000 machine setups each period due to limited skilled labour, and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period? Question 6Answera.910,000b.910,000b.975,000c.1,820,000d.1,820,000d.845,000

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Solution

To find the largest possible total contribution margin, we need to determine which product gives us the highest contribution margin per machine setup.

First, calculate the contribution margin per machine setup for each product:

Product L: 130/10setups=130 / 10 setups = 13 per setup Product C: 120/8setups=120 / 8 setups = 15 per setup

Product C gives a higher contribution margin per setup.

Next, calculate the total contribution margin that can be realized each period:

Product C: 15persetup65,000setups=15 per setup * 65,000 setups = 975,000

So, the largest possible total contribution margin that can be realized each period is 975,000.Therefore,theanswerisb.975,000. Therefore, the answer is b. 975,000.

This problem has been solved

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