|
Basic
|
Standard
|
Deluxe
|
|
Selling price
|
$9.00
|
$30.00
|
$35.00
|
|
Variable cost
|
$6.00
|
$20.00
|
$10.00
|
|
Machine hours required
|
0.10
|
0.50
|
0.75
|
Sealing's marketing director has assessed demand for the three types of storage units and believes that the firm can sell as many units as it can produce.
Required:
1. How many of each type of unit should be produced and sold to maximize the company's contribution margin? What is the total contribution margin for your selection?
2. Now suppose that Sealing Company believes that it can sell no more than 12,000 of the deluxe model but up to 50,000 each of the basic and standard models at the selling prices estimated. What product mix would you recommend, and what would be the total contribution margin?