Durham Corporation in Illinois, U.S. manufactures and sells three different types of high-quality sealed ball bearings for mountain bike wheels. The bearings vary in terms of their quality specifications—primarily with respect to their smoothness and roundness. They are referred to as Fine, Extra-Fine, and Super-Fine bearings. Machine time is limited. More machine time is required to manufacture the Extra-Fine and Super-Fine bearings. Additional information is provided below.(Currency unit: U.S. Dollars, $) Product FineExtra-finesuper-fineSelling price6.00$10.00$16.00$Variable costs and expenses 4.006.5011.00Contribution margin 2.00$3.50$5.00$Machine hours required0.020.040.08 (Instructions) Ignoring the machine time constraint, what strategy would appear optimal? What is the contribution margin per unit of limited resource for each type of bearing? If additional machine time could be obtained, how should the additional capacity be used?

Contribution margin per unit It is amount of a product’s selling price exceeds its variable costs.…

Answered: Ignoring the machine time constraint,…

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Chapter11: Linear Optimization Models

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Durham Corporation in Illinois, U.S. manufactures and sells three different types of high-quality sealed ball bearings for mountain bike wheels. The bearings vary in terms of their quality specifications—primarily with respect to their smoothness and roundness. They are referred to as Fine, Extra-Fine, and Super-Fine bearings. Machine time is limited. More machine time is required to manufacture the Extra-Fine and Super-Fine bearings. Additional information is provided below.(Currency unit: U.S. Dollars, $)

Product

	Fine	Extra-fine	super-fine
Selling price	6.00$	10.00$	16.00$
Variable costs and expenses	4.00	6.50	11.00
Contribution margin	2.00$	3.50$	5.00$
Machine hours required	0.02	0.04	0.08

(Instructions)

Ignoring the machine time constraint, what strategy would appear optimal?
What is the contribution margin per unit of limited resource for each type of bearing?
If additional machine time could be obtained, how should the additional capacity be used?

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