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2. + -/5 points My Notes + Ask Your Teacher Question 2. (choosing the optimal product...
2. + -/5 points My Notes + Ask Your Teacher Question 2. (choosing the optimal product mix when capacity is in short supply) You produce armor kits for military vehicles. Due to a recent expansion of the war on terror to an unnamed new country, the demand for your products is booming, and you do not have enough capacity to fully fill the demand. You offer 3 versions of the product, Basic, Premium and Supreme, which offer different levels of protection. The demand and cost information is as follows: Basic Premium Supreme Demand (units) 4,000 2,000 1,000 Price/unit $2,400 $4,000 $8,000 Unit vc $800 $1,200 $2,400 Machine hours per unit 1 1.5 Your capacity is 600 machine hours. Required: (a) Compute the CM per unit of capacity (machine-hour) for each product: Basic = $ per hour Premium = $ per hour Supreme = $ per hour (b) Based on your answer in (a), how much of each product should you produce? Basic = units Premium = units Supreme = units (if your answer for some product is zero units, explicitly enter 0 above)
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Compute the CM per unit of capacity (machine-hour) for each product a) Basic: CM per machine hour ($2,400 $800)/1 $1,600 perhour Premium: CM per machine hour ($4,000 $1,200) /1.5 $1,867 per hour Supreme: CM per machine hour ($8,000 $2,400) /4 $1,400 per hour b) Based on your answer in (a), how much of each product should you produce? The CM per unit of capacity is highest for Premium > produce Premium first. With 300 machine hours, we can produce 600 Mhs/1.5 Mhs per unit 400 units of Premium. Demandfor Premium is 2,000 units, so we can sell all of those 400 units. We have no capacity left, so we do not produce Basic and Supreme. Basic 400 units Premium 0 units Supreme 0 units
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