Cornerstones of Managerial Accounting 6th Edition by Maryanne Mowen,Don Hansen ,Dan Heitger

Exercise 43

Choosing the Optimal Product Mix with One Constrained Resource
Billings Company produces two products, Product Reno and Product Tahoe. Each product goes through its own assembly and finishing departments. However, both of them must go through the painting department. The painting department has capacity of 2,460 hours per year. Product Reno has a unit contribution margin of $120 and requires five hours of painting department time. Product Tahoe has a unit contribution margin of $75 and requires three hours of painting department time. There are no other constraints.
Refer to the information for Billings Company above.
Required:
1. What is the contribution margin per hour of painting department time for each product?
2. What is the optimal mix of products?
3. What is the total contribution margin earned for the optimal mix?