Turbo Engines, Inc. manufactures engines for commercial and consumer products. They manufacture two engines in
Department A: a snowmobile engine that has a selling price of $1,200 per unit and variable costs of $800 per unit and a boat engine that has a selling price of $1,500 and variable costs of $900 per unit. Each snowmobile engine requires 2 machine hours and each boat engine requires 5 machine hours. There is a constraint of 1,800 machine hours.
1. Suppose that Turbo can sell as many snowmobile engines and as many boat engines as it can manufacture. How many snowmobile engines and boat engines should Turbo manufacture? What is the total contribution margin for this combination?
2. Suppose that Turbo can sell no more than 600 snowmobile engines and no more than 400 boat engines. How many snowmobile engines and boat engines should Turbo manufacture? What is the total contribution margin for this combination?
Show your computations here.
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