A Company Makes Two Products A and B, Using A Single Resource Pool. The Resource Is Available For 900

02/01/2021 A company makes two products A and B, using a single resource pool.
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joeyq497
02/27/2020 • Business • College
answered
A company makes two products A and B, using a single resource

pool. The resource is available for 900 minutes per day. The
contribution margins for A and B are $20 and $35 per unit
respectively. The unit loads are 10 and 20 minutes per unit.
a. Which product is more profitable?
b. The company wishes to produce a mix of 60% As and 40% Bs. What is the effective
capacity (units per day)?
c. At the indicated product mix, what is the financial capacity (profit per day)?
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Answer 1
proz
Virtuoso • 783 answers • 438.8K people helped
Answer:
The answers are:
a. product A is more profitable
b. Effective capacities (units per day): Product A = 54 units, Product B = 18 units
c. the financial capacity (profit per day) = $1,710
Explanation:
a. To calculate the profit, we have to first define the term contribution margin; it refers to
the net price sold on the unit of a product after variable costs have been deducted. It can
be said to be the profit made on each unit of a product.
Now, we are told that Product A takes 10 minutes to produce, and its contribution margin
is $20, meaning that for every 10 minutes of labor input, $20 profit is realized. the same
4 answers left
explanation
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holds for product B which has a contribution margin of $35 and unit load is 20
minutes
minutes.
To get the profitable product, we will first calculate the contribution margin for 1 minute for
each
How itproduct;
works For parents For teachers Honor code
Product A;
10 minutes = $20
∴ 1 minute = 20 ÷ 10 = $2 ( for every 1 minute of labor input $2 is made)
Product B;
20 minutes = $35
∴ 1 minute = 35 ÷ 20 = $1.75 (for every 1 minute of labor input $1.75 is made)
since more money is made o product A for every 1 minute labor input, it has more profit
b. Total minute per day = 900

Note that product A is set at 60%, meaning that out of this 900 minutes, product A will
take 60%, therefore, 60% of 900 = 60/100×900
= 0.6 ×900 = 540 minutes, so product A will take up 540 minutes in a day
Product B is set at 40%, since we know that product A will take 540 out of 900 minutes,
we can calculate the number of minutes for product B as;
900 - 540 =360 minutes.
Therefore product A = 540 minutes per day
product B = 360 minutes per day
Effective capacity or units produced per day is calculated thus;
Product A,
10 minutes = 1 unit (unit load, given)
∴ 540 minutes = (1 ÷ 10) × 540 = 54 units per day
Product B;
20 minutes = 1 unit
∴ 360 minutes = (1 ÷ 20 ) × 360 = 18 units per day.
c. Profits per day using number of units calculated in b above

Product A;
14
unitanswers (given)Have more answers for free
= $20 left JOIN FOR FREE
54 units = 20 × 54 = $1 080 profit per day

∴ 54 units = 20 × 54 = $1,080 profit per day
Product B;
1 How
unit it=works
$35 For parents For teachers Honor code
∴ 18 units = 35 × 18 = $630 profit per day
Therefore total profit per day = $1,080 + $630 = $1,710
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02/01/2021 A company makes two products A and B, using a single resource pool.

g a single resource pool. The resource is available for 900 - Brainly.com

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