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Question - Winika Company produces three products with the following information:
Product
Good
Better
Best
Selling price per unit
$17
$19
$26
Variable cost per unit
$8
$10
$12
Machine-hours per unit (MH/unit)
2
3
4
The company has a limit of 14,300 machine-hours available per month and a monthly fixed cost of $35,000. The demand for each of the products is 2,500 units per month.
The company's goal is to maximize its profitability.
Suppose the company can rent a machine that will provide an additional 1,120 machine-hours per month.
Required - What is the maximum monthly rent the company should be willing to pay for this machine (assuming they've made optimal use of their own machine)?
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