Norton Company produces two products (Juno and Hera) that use the same material input. Juno uses two kilograms of the material for every unit produced, and Hera uses five kilograms. Currently, Norton has 16,000 kilograms of the material in inventory. All of the material is imported. For the coming year, Norton plans toarrow-10x10.png import an additional 8,000 kilograms, with the additional material the Company is able to produce 2,000 units of Juno and 4,000 units of Hera to satisfy its customers. The unit contribution margin is $30 for Juno and $60 for Hera.
Norton Company has received word that the source of the material has been shut down by an embargo. Consequently, the company will not be able toarrow-10x10.png import the 8,000 kilograms it planned to use in the coming year's production. No other source of the material exists.
Required:
1. Calculate the total contribution margin that the companyarrow-10x10.png would earn if it could manufacture 2,000 units of Juno and 4,000 units of Hera.
2.Determine the optimal usage of the company's inventory of 16,000 kilograms of the material. Calculate the total contribution margin for the productarrow-10x10.png mix that you recommend.