FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Brandon Technology makes two models of a specialized sensor for the aerospace industry. The difference in the two models relates to the required accuracy of the sensor. The Standard model is used for most normal operations while the High-Performance model is used for high-altitude and specialized missions. Before shipment, the two models are passed through a machine that, among other things, certifies the accuracy of the sensor. The company only has one testing machine. The price and costs of the two sensor models are shown here:
| Standard | High-Performance | |
|---|---|---|
| Price per sensor | $ 52 | $ 96 |
| Variable cost per sensor | $ 34 | $ 41 |
| Testing hours per sensor | 0.04 | 0.11 |
The testing machine used for both models has a capacity of 8,250 hours annually. Fixed
Required:
a. Suppose that the maximum annual unit sales that is possible for Brandon Technology is 250,000 units of the Standard model and 80,000 of the High-Performance model. How many units of each sensor model should Brandon Technology produce annually?
b. Suppose that the maximum annual unit sales that is possible for Brandon Technology is 150,000 units of the Standard model and 50,000 of the High-Performance model. How many units of each watch model should Brandon Technology produce annually?
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Step 1
CONTRIBUTION MARGIN PER UNIT
Contribution Margin Per Unit is the Difference between Selling Price per unit & Variable Cost Per Unit.
Contribution Margin Per Hour is Computed :—
= Contribution Margin ÷ Hours Utilised In Production of One Unit
In Optimal Product Mix, First of All Product We Produce the Product Which have Highest Contribution Margin Per Hour & after that producing other product by utilising Remaining Hours.
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