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  3. a. love company manufactures and sells three (3) l

A. Love Company manufactures and sells three (3) lines of product with contribution margins per...

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Accounting

A.

Love Company manufactures and sells three (3) lines of product with contribution margins per unit as follows:

Product A $ 16 Product B $ 2 Product C $ 6

Each unit of product requires production time as follows:

Product A 4 hours Product B 15 minutes Product C 1 hour

The market will absorb 32,000 units of Product B and 16,000 units of Product C. The company can sell as many units of Product A as it can produce. The plant has a capacity of 30,000 hours.

REQUIRED:

  1. What is the most profitable line of product on the basis of contribution margin per hour?
  2. Compute the maximum contribution margin that will meet all the conditions stated

B.

The ABC Food Company owns and operates a chain of 200 super marts. Budgeted data for the Super Mart are as follows:

Annual sales $ 8,500,000

Annual costs of goods sold and other operating expenses 7,640,000

The company can lease the building to a large hardware shop for $ 80,000 per month.

REQUIRED: Determine whether to continue operating the super mart or to lease it.

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