Question

Best for Pets has three product lines: cat food, dog food, and fish food. For the coming month, 4,000 units of direct materials will be needed to meet expected demand. However, only 3,200 units are available. Additional information on the three product lines is given here:

Answer 1

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Cat Food Dog Food Fish Food

Contribution margin per unit $4.50 $5.60 $2.70

of product

Contribution margin per unit $5.30 $3.57 $4.65

of Direct materials

The contribution margin per unit of direct materials is higher for Cat food than Dog and Fish food, hence the company should sell Cat food in order to maximize profit.

Number of units of direct materials available = 3,200 units

Contribution margin per unit of direct materials of cat food = $5.30

Total profit = Number of units of direct materials available * Contribution margin per unit of direct materials of cat food

Total profit = 3,200 unit * $5.30

Total profit = $16,960

Thus, $16,960 is the maximum profit if the company can sell either of the three products.