What is the maximum Clarke would be willing to pay

Reference no: EM132847286

Problem - Clarke Corporation manufactures three products (X-1, X-2, and X-3) utilizing, in one of the processes, a single machine for all products. Data on the individual products follow.

	X-1	X-2	X-3
Price per unit	$100	$200	$400
Variable cost per unit	$50	$120	$240
Machine hours per unit	1.0	2.5	4.0
Maximum units demand per period	300,000	150,000	20,000

The single machine used for all three products has a maximum capacity of 500,000 hours per period.

Required -

a. How many units of each product should be produced each period?

b. A local engineering firm has suggested to Clarke that it might be able to increase the capacity on the machine. What is the maximum Clarke would be willing to pay for an increase of twenty machine hours?

c. Suppose the maximum capacity on the machine was 300,000 hours (instead of 500,000 hours). What is the maximum Clarke would be willing to pay for an increase of twenty machine hours?

d. At what capacity (in machine hours) would the machine no longer be a bottleneck?

Reference no: EM132847286

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