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sales mix with limited resources

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Manning Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Manning is currently operating at full capacity with limited machine time.

Sales and production information relevant to each model follows.

Product
Economy Standard Deluxe
Selling price $30 $50 $100
Variable costs and expenses $12 $18 $42
Machine hours required .5 .8 1.6

Hint:
Determine sales mix with limited resources.

Instructions
(a) Ignoring the machine time constraint, which single product should Manning Industries produce?

(b) What is the contribution margin per unit of limited resource for each product?

(c) If additional machine time could be obtained, how should the additional time be used?

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Solution Summary

A sales mix with limited resources is assessed.

Solution Preview

a)
Economy Standard Delux
Selling Price $30 $50 $100
Variable cost $12 $18 $42
Contribution Margin $18 $32 ...

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