Final answer:
Given the data, the largest possible total contribution margin would be achieved by producing as many units of Product C as possible, because it has the higher contribution margin per machine minute. With the available 60,000 machine minutes, it is possible to produce 7,500 units of Product C, resulting in a total contribution margin of $840,000 (option 2).
Step-by-step explanation:
To calculate the largest possible total contribution margin that can be realized each period given the production and cost data for two products, L and C, we need to determine how many units of each product can be produced in the available 60,000 machine minutes and then calculate the contribution margin for each.
Since there is an unlimited demand for each product, we want to maximize the production of the product with the higher contribution margin per machine minute.
Product L has a contribution margin of $120 per unit and requires 10 machine minutes per unit. In contrast, Product C has a contribution margin of $112 per unit and requires 8 machine minutes per unit.
Calculating the contribution margin per machine minute for each product:
- Product L: $120 / 10 minutes = $12 per machine minute
- Product C: $112 / 8 minutes = $14 per machine minute
Since Product C has a higher contribution margin per minute, we should produce as many units of Product C as possible. With 60,000 machine minutes available:
60,000 minutes / 8 minutes per unit = 7,500 units of Product C
The total contribution margin for Product C is:
7,500 units × $112 per unit = $840,000