Question

Uva Systems Inc. has a limited amount of direct material available for products 1A1 and 2B2. Each unit of 1A1 has a contribution margin of $12 and each unit of 2B2 has a contribution margin of $30. A unit of 2B2 uses three times as much direct material as a unit of 1A1. What is Uva's most profitable sales mix, assuming there is unlimited demand for either product

Answer 1

Make All 1A1

Step-by-step explanation:

Calculation to determine What is Uva's most profitable sales mix, assuming there is unlimited demand for either product

First step is to calculate the Contribution margin of 1 unit of 2B2

Contribution margin of 1 unit of 2B2 = 1 x $30

Contribution margin of 1 unit of 2B2 = $30

Second step is to calculate the Contribution margin of 3 units of 1A1

Contribution margin of 3 units of 1A1 = 3 x $12

Contribution margin of 3 units of 1A1 = $36

Based on the above calculation for both Contribution margin of 1 unit of 2B2 and Contribution margin of 3 units of 1A1 we can see that Contribution margin of 3 units of 1A1 is the most profitable sales mix.

Therefore Uva's most profitable sales mix, assuming there is unlimited demand for either product is Make All 1A1