In the travel bag problem, which bag type yields the highest contribution per machine hour?

In the travel bag problem, which bag type yields the highest contribution per machine hour?

• A. Economy
• B. Standard
• C. Deluxe
• D. All have equal contribution per hour

Answer: (A)

The main idea is contribution per machine hour: how much profit you get for each hour of machine time spent. Compute it as the contribution per unit (selling price minus variable costs) divided by the hours required to make one unit. When machine hours are limited, you maximize total profit by producing the option with the highest contribution per hour, because every hour worked yields the most profit there. In this scenario, the economy bag has the largest contribution per machine hour, so it delivers the most profit for each hour of machine time available. The standard and deluxe bags either take more hours per unit or offer less contribution per unit, leading to a lower contribution per hour. If demand constraints were the bottleneck, you’d still allocate hours first to the economy bags up to their demand, then to the next-best option, and so on.

The main idea is contribution per machine hour: how much profit you get for each hour of machine time spent. Compute it as the contribution per unit (selling price minus variable costs) divided by the hours required to make one unit. When machine hours are limited, you maximize total profit by producing the option with the highest contribution per hour, because every hour worked yields the most profit there.

In this scenario, the economy bag has the largest contribution per machine hour, so it delivers the most profit for each hour of machine time available. The standard and deluxe bags either take more hours per unit or offer less contribution per unit, leading to a lower contribution per hour. If demand constraints were the bottleneck, you’d still allocate hours first to the economy bags up to their demand, then to the next-best option, and so on.