Zordan Tools Corporation makes and sells brushes and combs. It can sell all of either product it can make. The following data are pertinent to each respective product: Brushes Combs Units of output per machine hour 8 20 Selling price per unit $12.00 $4.00 Product cost per unit Direct material $1.00 $1.20 Direct labor 2.00 0.10 Variable overhead 0.50 0.05 Total fixed overhead is $380,000. The company has 40,000 machine hours available for production. What sales mix will maximize profits

Zordan Tools Corporation

                                                                   Brushes  Combs

The Sales mix that maximizes profits is     2,800      880

Explanation:

a) Data and Calculations:

                                                    Brush     Comb

Units of output per machine hour   8           20

Selling price per unit                $12.00      $4.00

Product cost per unit

Direct material                            $1.00      $1.20

Direct labor                                  2.00        0.10

Variable overhead                      0.50        0.05

Total variable cost per unit      $3.50       $1.35

Contribution margin per unit   $8.50      $2.65

Contribution margin per hour  $68         $53 ($2.65 * 20)

Contribution margin ratio =      0.56        0.44 ($53/$121)

Available machine hours for production = 40,000

Allocation of machine hours per

contribution margin =             22,400     17,600 (40,000 * 44%)

Units produced                         2,800         880 (17,600/20)

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