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Ivanhoe's Wind Toys manufactures decorative kites, banners, and windsocks. During the month of January, Ivanhoe received orders for 4,000 Valentine’s Day banners and 1,300 Easter kites. Because several sewing machines are in the shop for repairs, Ivanhoe has only 1,200 sewing machine hours available for production of these orders. Each Valentine’s Day banner sells for $11. The banners take one hour to sew and have a total variable cost of $9 per banner. The Easter kites sell for $15. They take 15 minutes to sew and have a total variable cost of $14. (a) With only 1,200 sewing machine hours available, how many units should Ivanhoe produce for the below items?

Answer :

Answer:

1300 Easter kites and 875 Valentine's banners

Explanation:

Contribution per unit of Valentines day banner=11-9 =$2

Hours required for a unit of Valentines day banner = 1 hour

Contribution per unit of Easter kites = 15 -14 = $1

Hours required to sew Easter kite = 0.25

Contribution per hour for Easter Kite = 1*4 = $4

To maximize profit , Ivanhoe should produce

1300 Easter Kite.

Hours required for 1300 Easter Kite = 1300*.25=325 hours

The he can used the remaining hours (1200-325= 875) to produce 875 Valentines day banner

Over all contribution = (325 * 4) + (875*2)= 1300+1750=3050.

This is better than using all the available hours to produce 1200 Valentine's days banners and have an overall contribution =f 1200*2 = $2,400

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