Allocating scarce resourcesHawn Company makes two products, M and N.
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Allocating scarce resources
Hawn Company makes two products, M and N. Product information follows.
Product M
Product N
Selling price per unit
$75
$90
Variable cost per unit
48
55
Required
Identify the product that should be produced or sold under each of the following constraints. Consider each constraint separately.
a. One unit of Product M requires 3 hours of labor to produce, and one unit of Product N requires
5 hours of labor to produce. Due to labor constraints, demand is higher than the company’s capacity to make both products.
b. The products are sold to the public in retail stores. The company has limited floor space and cannot stock as many products as it would like. Display space is available for only one of the two products.
Expected sales of Product M are 8,000 units, and expected sales of Product N are 7,000 units.
c. The maximum number of machine hours available is 36,000. Product M uses 6 machine hours, and
Product N uses 10 machine hours. The company can sell all the products it produces.
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