Question

Morgan Inc. has 5,400 machine hours available each month. The following information on the company's three products is available: Product 1 Product 2 Product 3 Contribution margin per unit $ 15.00 $ 18.00 $ 7.50 Machine hours per unit 3 2 1 If market demand exceeds the available capacity, in what sequence should orders be filled to maximize the company's profits>

Answer 1

Answer:

We maximize the production if we  first do Product 2 then, Product 3 and last Product 1

Explanation:

$\left[\begin{array}{ccccc}Product&1&2&3&\\CM&15&18&7.5&\\ Constrain resource&3&2&1&\\ CM per constrain&5&9&7.5&\\\end{array}\right]$

We will divide the contribution margin of eahc product by the amount of machine hours needed . This will give us the contribution margin per machine hours. The higher thecontribution, the higher the better use of the machine hour

We maximize the production if we  first do Product 2 then, Product 3 and last Product 1