During a local outbreak of influenza, Oin Co. can only count on having 1,500 direct...
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Accounting
During a local outbreak of influenza, Oin Co. can only count on having 1,500 direct labour hours available each week. Oil Co. produces three products whose associated costs are provided below.
| Product A | Product B | Product C | |
|---|---|---|---|
| Sales price (per unit) | $900 | $600 | $700 |
| Pounds of direct materials needed per unit | 5 lbs. | 4 lbs. | 6 lbs. |
| Direct labour hours needed per unit | 4 dlh | 2 dlh | 5 dlh |
| VMOH cost (per unit) | $40 | $34 | $45 |
| FMOH cost (per unit) | $50 | $50 | $50 |
Oin Co. purchases direct materials for $20 per pound. Their wage rate is $17 per direct labour hour.
Oin Co. needs to produce at least 120 units of each product each week.
What is the maximum contribution margin Oin Co. can earn each week, given the constraints on their inputs?
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