Question

Zordan Tools Corporation makes and sells brushes and combs. It can sell all of either product it can make. The following data are pertinent to each respective product: Brushes Combs Units of output per machine hour 8 20 Selling price per unit $12.00 $4.00 Product cost per unit Direct material $1.00 $1.20 Direct labor 2.00 0.10 Variable overhead 0.50 0.05 Total fixed overhead is $380,000. The company has 40,000 machine hours available for production. What sales mix will maximize profits

Answer 1

Zordan Tools Corporation

Brushes Combs

The Sales mix that maximizes profits is 2,800 880

Step-by-step explanation:

a) Data and Calculations:

Brush Comb

Units of output per machine hour 8 20

Selling price per unit $12.00 $4.00

Product cost per unit

Direct material $1.00 $1.20

Direct labor 2.00 0.10

Variable overhead 0.50 0.05

Total variable cost per unit $3.50 $1.35

Contribution margin per unit $8.50 $2.65

Contribution margin per hour $68 $53 ($2.65 * 20)

Contribution margin ratio = 0.56 0.44 ($53/$121)

Available machine hours for production = 40,000

Allocation of machine hours per

contribution margin = 22,400 17,600 (40,000 * 44%)

Units produced 2,800 880 (17,600/20)