Answer:
a) Production schedule
Product 3 - 3000 hr × $22.5 = 67,500
Product 2 - 2000 × $ 17/hr = 34,000
Product 1 -- 200 units × $15/ hr = 3,000
b) Possible maximum contribution margin
= $104,500
Explanation:
The production schedule that will be maximize the profit for Short Inc is that which maximizes the contribution per unit if the scarce machine hours.
Since Short Inc faces a limiting a factor in form of machine hours, it should allocate its its resources in such a way that maximises the contribution per unit of machine hours.
This is done below using a table:
Product 1 2 3
Contribution 45.00 54.00 22.50
Machine hour /unit 3 2 1
Contribution per hr 15 17/hr $22.5/hr
Ranking 3rd 2nd 1st
Production schedule:
Prroduct units Machine hours required
3 3000 3000×1 = 3000
2 1000 1000× 2 = 2000
1 200 66.7 200
5,200
Amount of machine hours available for product 1 is the a balance after allocation to Product 3 and Product 2. It is determined as follows:
=5,200 - ( 3000 + 2000)
= 200 hours
Units of product 1 to be produced = 200/3 = 66.7 units
Optimum production schedule
Product 3 - 3000 units
Product 2 - 1000 units
Product 1 --66.7 units
B) Maximum possible contribution margin
Product 3 - 3000 hr × $22.5 = 67,500
Product 2 - 2000 × $ 17/hr = 34,000
Product 1 -- 200 units × $15/ hr = 3,000
Total maximum contribution = $67,500 + $34,000 + $3000
= $104,500
