Marley Corporation makes three products (X, Y, & Z) with the following character

Question

Marley Corporation makes three products (X, Y, & Z) with the following characteristics:

The company has a capacity of 2,000 machine hours, but there is virtually unlimited demand for each product. In order to maximize total contribution margin, how many units of each product should the company produce?

Multiple Choice

0 units of X, 500 units of Y, and 0 units of Z

2,000 units of X, 500 units of Y, and 200 units of Z

1,000 units of X, 0 units of Y, and 0 units of Z

0 units of X, 0 units of Y, and 200 units of Z

Products X Y Z Selling price per unit $ 10 $ 15 $ 20 Variable cost per unit $ 6 $ 10 $ 10 Machine hours per unit 2 4 10

Explanation / Answer

Contribution Margin of the Company:-

Produce Maximum Units of X

The Answer is 'C'

C. 1,000 units of X, 0 units of Y, and 0 units of Z

Particulars X Y Z Selling Price Per Unit $10 $15 $20 Less : Variable Cost Per Unit $6 $10 $10 Contribution Margin Per Unit $4 $5 $10 Machine Hours Per Unit 2 4 10 Contribution Per Machine Hour $2 $1.25 $1 Optimal I II III

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