What is the maximum contribution margin for upcoming year

Reference no: EM132783206

Mountaineer Products manufactures two types of tents: single-wall and double-wall. Selected data related to each type of tent is as follows:

	Single-wall	Double-wall
Sales price	P250	P375
Direct materials	25	50
Direct labor	20	40
Variable overhead	10	15
Machine hours	2	3

Total fixed overhead is P150,000. Most of the manufacturing process is done on specialized machines. For the upcoming year, there is a maximum of 9,000 machine hours available. Management believes there is sufficient demand for 3,000 single-wall and 4,000 double-wall tents each year.

Problem 1: In order to maximize profits, how many of each type of tent should be produced?

a. Single-wall: 3,000 Double-wall: 1,000

b. Single-wall: 0 Double-wall: 3,000

c. Single-wall: 1,800 Double-wall: 1,800

d. Single-wall: 1,500 Double-wall: 4,000

Problem 2: If the company maximizes profits, what is the maximum contribution margin for the upcoming year?

a. P232,500

b. P382,500

c. P705,000

d. P855,000

Reference no: EM132783206

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