Mega Chemical Company produces ZylexA and a related product called ZylexB. Zylex
ID: 2348556 • Letter: M
Question
Mega Chemical Company produces ZylexA and a related product called ZylexB. ZylexB. Which sells for $15.00 per gallon, is made from a base of ZylexA plus additional ingredients. It takes 25 minutes to manufacture a gallon of ZylexA and an additional 10 minutes to manufacture a gallon of ZylexB. ZylexA sells for $9.00 per gallon. The cost per gallon of manufacturing ZylexA and the additional costs to convert in into ZylexB are:(ZylexA) (Additional cost to convert ZylexA into ZylexB)
Material $2.00 $1.75
Labor 2.50 0.50
Variable overhead 2.25 1.10
Both products have been successful, and demand for both products is strong and beyond the company
Explanation / Answer
Particulars Zylex A Zylex B Sale Price 9 15 Mat. Cost 2 3.75 Lab. Cost 2.5 3 Var. OH 2.25 3.35 Cont. 2.25 4.9 Min Taken 25 35 Cont. per min 0.09 0.14 Therefore B should be produced as its contribution per key factor is greater.