Problem:
A company manufactures two products. The contribution margin per unit is determined as follows for both products:
|
Product 1-Nuts
|
Product 2-Bolts
|
|
Sales revenue
|
$140
|
$90
|
|
Variable costs
|
50
|
60
|
|
Contribution margin
|
$90
|
$30
|
The total amount of demand for product 1 is 11,000 units.
The total amount of demand for product 2 is 7,000 units.
Typically, 30,000 machine hours are available during the year. Product 1 requires 5 machine hours per unit while Product 2 requires 1 machine hours per unit.
How many units of product 1 and product 2 should this company produce to maximize profits?
Note: Please explain comprehensively and give step by step solution.
Note: Explain all steps comprehensively.