Question

Logan Company can sell all of the standard and premier products they can produce, but it has limited production capacity. It can produce 8 standard units per hour or 4 premier units per hour, and it has 36,600 production hours available. Contribution margin per unit is $20.00 for the standard product and $23.00 for the premier product. What is the total contribution margin if Logan chooses the most profitable sales mix

Answer 1

Answer:

The most profitable sales mix is 288,000 standard units and 0 premier units.

Explanation:

8 standard units per hour

4 premier units per hour

36,600 production hours available

For standard units, contribution margin per hour = 8 x $20 =  $160

For premier units, contribution margin per hour = 4 x $23 = $92

Therefore,  most profitable sales mix = 36,000 hours x 8 units per hour of standard product

= 288,000 standard units and 0 premier units.