The Bilko Company Manufactures Two Products: Widgets and Gadgets There Are 40,000 Direct Labour Hours Available During the Year

Essay

The Bilko Company manufactures two products: widgets and gadgets. Information about the products is as follows: $\begin{array}{lrr}&\text { Widgets } &\text { Gadgets }\\\text { Revenue per unit } & £ 200 & £ 150 \\\text { Variable costs per unit } & -110 & \underline{90} \\\text { Contribution margin per unit } & \underline{£ 90} & \underline{£ 60}\\\\\text { Total demand } & 20,000 \text { units } & 20,000 \text { units } \\\text { Direct labour hours per unit } & 1.5 \mathrm{DLH} & 1.2 \mathrm{DLH}\end{array}$
There are 40,000 direct labour hours available during the year.
a.Which of the products should Bilko Company produce if it can only produce one of the products?
b.Assume that Bilko Company uses half of the hours available to produce widgets and half of the hours available to produce gadgets. What is Bilko's total contribution margin?
c.Assume that Bilko Company produces the product mix that will maximize profit. What is Bilko's total contribution margin?