1 answer

Profit Maximization

Question:

Supreme Celery Corporation manufactures four celery based products. Floods and fire on the west coast are going to cause a shortage of celery for Supreme next month.Information related to the four celery products that it produces are shown below. The numbers relate to the cost per case and the amount of celery per case ofproduct:
Jelly Cracker Spread Soup Snack Bars
Sales Price 40 32 35 65
VC 34 22 27 50
Pounds of celery required
18 20 28 38
To maximize profit next month, in what order would it be best for Supreme to schedule production (first to last)?
A. Jelly, Snack Bars, Cracker Spread, Soup
B. Cracker Spread, Snack Bars, Jelly, Soup
C. Snack Bars, Jelly, Soup, Cracker Spread
D. Jelly, Cracker Spread, Soup, Snack Bars

Answers

To approach this kind of question, we calculate the contribution generated per each pound for each product using the following formula:

CM per pound = (Sale Price - VC) / Pounds required

Here's the calculation
Jelly = (40-34) / 18 = 0.33
Cracker Spread = (32-22) / 20 = 0.5
Soup = (35-27) / 28 = 0.2857
Snack Bar = (65-50) / 38 = 0.3947

Thus, we should produce in this order: 1) Cracker Spread 2) Snack Bar 3) Jelly 4) Soup

The answer is (B).

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