Turbo Engines, Inc. manufactures engines for commercial and consumer products. They manufacture two engines in Department A: a snowmobile engine that has a selling price of $1,000 per unit and variable costs of $700 per unit and a boat engine that has a selling price of $1,200 and variable costs of $600 per unit. Each snowmobile engine requires 2 machine hours and each boat engine requires 3 machine hours. There is a constraint of 1,500 machine hours.

Answer and Show Work:

1. Suppose that Turbo can sell as many snowmobile engines and as many boat engines as it can manufacture. How many snowmobile engines and boat engines should Turbo manufacture? What is the total contribution margin for this combination?

Snowmobile engines
Boat engines
Contribution margin

2. Suppose that Turbo can sell no more than 300 snowmobile engines and no more than 350 boat engines. How many snowmobile engines and boat engines should Turbo manufacture? What is the total contribution margin for this combination?

Snowmobile engines
Boat engines
Contribution margin

Answer rating: 100% (QA)

Optimal Production Quantities and Contribution Margin Scenario 1 Unlimited Demand 1 ... View the full answer