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The particulars of four types of calculator produced are stated below. If material is in short​ supply, which type of calculator should be produced to maximise​ profit?

Blue
Sale price: £37.5
Contribution: £15.75
Material cost: £13.5

Black
Sale price: £31.5
Contribution: £15
Material cost: £4.50

Green
Sale price: £33.75
Contribution: £13.5
Material cost: £13.5

Red
Sale price: £41.25
Contribution: £13.5
Material cost: £18

A. Red
B. Green
C. Black
D. Blue

User Auser
by
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1 Answer

5 votes

Final answer:

To maximize profit with limited material, the Black calculator should be produced because it has the highest contribution per unit of material cost ratio of 3.33.

Step-by-step explanation:

If material is in short supply and the goal is to maximize profit, the focus should be on the product that offers the highest contribution per unit of material used. This is calculated by dividing the contribution by the material cost for each type of calculator. After performing this calculation, we choose the calculator that has the highest contribution to material cost ratio.

The Black calculator has a sale price of £31.5, a contribution of £15, and a material cost of £4.50. By dividing the contribution by the material cost (£15/£4.50), we get a ratio of 3.33. This is the highest ratio amongst the calculators, meaning it provides the most profit per unit of material used.

Therefore, the Black calculator should be produced to maximize profit when material is in short supply.

User FiqSky
by
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