Question

A stationery company makes two types of notebooks: a deluxe notebook with subject di- viders, which sells for $4.00, and a regular notebook, which sells for $3.00. The production cost is $3.20 for each deluxe notebook and $2.60 for each regular notebook. The com- pany has the facilities to manufacture between 2000 and 3000 deluxe and between 3000 and 6000 regular notebooks, but not more than 7000 altogether. How many notebooks of each type should be manufactured to maximize the differ- ence between the selling prices and the production costs

Answer 1

A Stationery Company

To maximize contribution (the difference between the selling prices and the production costs), the company should produce 3,000 deluxe and 4,000 regular notebooks.

Step-by-step explanation:

a) Data and Calculations:

Deluxe Regular

Selling price per unit $4.00 $3.00

Production cost per unit 3.20 2.60

Contribution per unit $0.80 $0.40

Production capacity = 7,000 notebooks

Range of production 2,000 - 3,000 3,000 - 6,000

Notebooks to produce 3,000 4,000

Maximum contribution $2,400 $1,600 = $4,000