The Valor Company manufactures two products: L and M. The costs and revenues are as follows: Product L Product MSales price$150 $112 Variable cost per unit 90 68 Machine hours per unit 15 10 Total demand for Product L is 2,000 units and for Product M is 1,000 units. Machine time is a scarce resource. During the year, 36,000 machine hours are available.Required:a. How many units of Products L and M should Valor produce?
What will be an ideal response?
a.
L = 1,733; M = 1,000
CM/hr: L: ($150 ? 90)/15 hr = $4/hr; M: ($112 ? 68)/10 hr = $4.40; M first, then L.
M: 1,000 × 10 hr = 10,000 hr; 36,000 ? 10,000 = 26,000 remaining/15 = 1,733 L.
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