ABC Company produces Product X, Product Y, and Product Z. All three products req
ID: 2431594 • Letter: A
Question
ABC Company produces Product X, Product Y, and Product Z. All three products require processing on specialized finishing machines. The capacity of these machines is 2,840 hours per month. ABC Company wants to determine the product mix that should be achieved to meet the high demand for each product and provide the maximum profit. Following is information about each product:
Required:
Determine how the 2,840 hours of machine time should be allocated to the three products to provide the most profitable product mix. (Do not round intermediate calculations.)
Product X Product Y Product Z Selling price $ 148 $ 117 $ 39 Variable costs 103 61 31 Machine time per unit 4 hours 4 hours 1 hour Monthly demand (units) 430 280 760Explanation / Answer
Product X Product Y Product Z Selling price 148 117 39 Less: Variable costs 103 61 31 Unit contribution margin 45 56 8 Machine time per unit 4 4 1 Contribution margin per machine hour 11.25 14 8 Rank in Production 1 1 3 Machine hours allocation: Product Y 1120 =280*4 Product X 1720 =430*4 Product Z 0 =2840-1120-1720