Cambridge Manufacturing Company, Inc. has 200 labor-hours available. There is no limit on machine hours. Cambridge can sell all of Product B that it wants, but it can only sell 30 units and 20 units of Products A and C, respectively.
Product-A Product-B Product-C
Contribution Margin Per Unit $20 $10 $16
Labor Hours Per Unit 4 5 4
Machine Hours Per Unit 10 8 2
Which product (s) and how many should Cambridge produce given the limited supply of labor-hours?
(Points : 4)
30 Units of Product A.
30 Units of Product A; 20 Units of Product C.
30 Units of Product A; 16 Units of Product C.
40 Units of Product B.
To answer this question, we need to determine which combination of products maximize the contribution margin while staying within the available labor-hours.
First, let's calculate the total contribution margin per unit for each product:
Product A: $20
Product B: $10
Product C: $16
Next, let's calculate the labor hours required to produce each unit of each product:
Product A: 4 labor hours per unit
Product B: 5 labor hours per unit
Product C: 4 labor hours per unit
We have 200 labor-hours available. Now, let's consider the options:
1. 30 Units of Product A:
- This would require 30 units * 4 labor hours = 120 labor hours.
- This leaves us with 200 - 120 = 80 labor hours.
- However, we still have 80 labor hours available, so we can produce more products.
2. 30 Units of Product A; 20 Units of Product C:
- This would require 30 units * 4 labor hours = 120 labor hours for Product A.
- Additionally, Product C would require 20 units * 4 labor hours = 80 labor hours.
- In total, this option would use 120 + 80 = 200 labor hours.
- This uses up all the available labor hours, so we can't produce any more products.
3. 30 Units of Product A; 16 Units of Product C:
- This would require 30 units * 4 labor hours = 120 labor hours for Product A.
- Additionally, Product C would require 16 units * 4 labor hours = 64 labor hours.
- In total, this option would use 120 + 64 = 184 labor hours.
- This leaves us with 200 - 184 = 16 labor hours.
- However, we can produce more products with the remaining labor hours.
4. 40 Units of Product B:
- This would require 40 units * 5 labor hours = 200 labor hours.
- This uses up all the available labor hours, so we can't produce any more products.
Based on the calculations, the best option is option 3: 30 units of Product A and 16 units of Product C. This combination maximizes the contribution margin while utilizing most of the available labor hours.