Question

Lie Around Furniture manufactures two​ products: Couches and Beds. The following data are​ available: Couches Beds Sales price Variable costs The company can manufacture either couches per machine hour or ​bed(s) per machine hour. The​ company's production capacity is machine hours per month. To maximize​ profits, what product and how many units should the company produce in a​ month?

Answer 1

the company should produce 5,200 / 0.5 = 10,400 beds, resulting in a gross profit of $3,692,000

Step-by-step explanation:

The numbers are missing, so i looked them up:

sales price variable costs machine hours

Couches $550 $350 0.333

Beds $750 $395 0.5

total machine hours = 5,200

the constraint here is machine hours, so we must determine the contribution margin per machine hour:

• couches = $200 / 0.333 = $600
• beds = $355 / 0.5 = $710

since the contribution margin per machine hour is higher for beds, then the company should produce 5,200 / 0.5 = 10,400 beds, resulting in a gross profit of $3,692,000