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Step-by-step answer to Profit Maximization

ABC Co has 200 labor hours available. There is no limit on machine hours. ABC can sell all of Y it wants, but can only sell a maximum of 30 units of X and 20 units of Z.

x y z
Contribution Margin per Unit $20 $10 $16
Labor Hours per Unit 4 5 4
Machine Hours per Unit 10 8 2

To maximize profits how many of each product should ABC make?

Solution Preview

We first need to determine the contribution margin per unit of constrained resource. Labor hours is the constrained resource here as we have a maximum of 200 hours.

Contribution Margin ...

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