Homer Simpson Company produces three types of donuts, Giant, Humungous and Death by Donut, that...
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Accounting
Homer Simpson Company produces three types of donuts, Giant, Humungous and Death by Donut, that are in high demand. Following is information for each of these products:
|
| Giant | Humungous | Death by Donut |
| Selling price per item | $16.75 | $18.50 | $25.60 |
| Variable cost per item | 14.00 | 13.50 | 19.20 |
| Contribution margin per item | $2.75 | $5.00 | $6.40 |
| Machine hours per item | 1.25 | .75 | 1.5 |
| Orders | 800 | 600 | 700 |
Homer has a resource constraint of 2,000 machine hours available each month. Demand for each type of donut exceeds Homers capacity to produce the item.
- In order to maximize the companys total contribution margin, in what sequence should Homer fill orders?
- How many of each should she produce?
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