Refer to the information for Billings Company above. Assume that only 500 units of each product can

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Refer to the information for Billings Company above. Assume that only 500 units of each product can be sold.
Billings Company produces two products, Product Reno and Product Tahoe. Each product goes through its own assembly and finishing departments. However, both of them must go through the painting department. The painting department has capacity of 2,460 hours per year. Product Reno has a unit contribution margin of $ 120 and requires five hours of painting department time. Product Tahoe has a unit contribution margin of $ 75 and requires three hours of painting department time. There are no other constraints.
Required:
1. What is the optimal mix of products?
2. What is the total contribution margin earned for the optimal mix?
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Cornerstones of Financial and Managerial Accounting

ISBN: 978-1111879044

2nd edition

Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen

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