Exercise 23-6 Sales mix determination and analysis LO P3 Colt Company owns a machine that can produce two specialized

Question

Exercise 23-6 Sales mix determination and analysis LO P3 Colt Company owns a machine that can produce two specialized products Production time for Product TLX is two units per hour and for Product MTV is five units per hour. The machine's capacity is 2,200 hours per year. Both products are sold to a single customer who has agreed to buy all of the company's output up to a maximum of 3740 units of Product TLX and 2,000 units of Product MTV Selling prices and variable costs per unit to produce the products follow. per unit Product TX Selling price per unit $11.50 Variable costs per unit Product MTV 56.90 3.45 Determine the company's most profitable sales mix and the contribution margin that results from that sales mix (Round per unit contribution margins to 2 decimal places.) Product TLX Product MTV hes Contribution margin per un Contribution margin per production ho Total Maximum number of units to be sold Hours required to produce maximum Product TLX 3740 Product MTV 2,000 Product TIX

Help In Homework · Accepted Answer

Product TLX Product MTV Selling Price per Unit $11.50 $6.90 (-) Variable Expenses per unit $3.45 $4.14 Contribution Margin Per unit $8.05 $2.76 Production Hours per Unit 0.50 per hour (1 hour/2 unit) 0.20 per hour (1 hour/5 unit) Contribution Margin per production Hour $16.1 per hour ($8.05/0.50) $13.8 per hour ($2.76/0.20) Ranking I II Total Maximum Number of units to be sold 3,740 2,000 5,740 Hours required to produce maximum units 1870 hour (3740*0.50) 400 hour (2000*0.20) 2,270 hour For Most Proftable Sales Mix Hours dedicated to the production of each product 1,870 hours 330 hours (2,200-1,870) 2,200 hours Units produced for most profitable sales mix 3,740 1,650 (330 hour*5 unit) Contribution Margin per unit $8.05 $2.76 Total Contribution Margin $30,107 (3740*$8.05) $4554 (1650*$2.76) $34,661

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Exercise 23-6 Sales mix determination and analysis LO P3 Colt Company owns a machine that can produce two specialized products Production time for Product TLX is two units per hour and for Product MTV is five units per hour

Expert Solution

Archived Solution

	Product TLX	Product MTV
Selling Price per Unit	$11.50	$6.90
(-) Variable Expenses per unit	$3.45	$4.14
Contribution Margin Per unit	$8.05	$2.76
Production Hours per Unit	0.50 per hour (1 hour/2 unit)	0.20 per hour (1 hour/5 unit)
Contribution Margin per production Hour	$16.1 per hour ($8.05/0.50)	$13.8 per hour ($2.76/0.20)
Ranking	I	II
			Total
Maximum Number of units to be sold	3,740	2,000	5,740
Hours required to produce maximum units	*1870 hour (37400.50)**	*400 hour (20000.20)**	2,270 hour

For Most Proftable Sales Mix
Hours dedicated to the production of each product	1,870 hours	330 hours (2,200-1,870)	2,200 hours
Units produced for most profitable sales mix	3,740	1,650 (330 hour*5 unit)
Contribution Margin per unit	$8.05	$2.76
Total Contribution Margin	$30,107 (3740*$8.05)	$4554 (1650*$2.76)	$34,661