Im not sure the order, but I guessed Y, Z, X. The Benner Company produces three
ID: 2444256 • Letter: I
Question
Im not sure the order, but I guessed Y, Z, X.
The Benner Company produces three products, X, Y and Z. Data concerning the three products follows (per unit): Demand for the company's products is very strong, with far more orders some months than the company can produce with the available raw materials. The same material is used in each product and costs $4 per pound. Which orders would you advise the company to accept first: those for X, for Y or for Z? Show work explaining why. Assume that Benner only produces and sells Product Y at the costs noted above, and they have customer demand for sales over and above those that can be satisfied with the material available. A foreign supplier has material available at a higher price. What is the maximum that Benner would be willing to pay the supplier for additional material? per poundExplanation / Answer
a. First accept the order of Product Y it's total cost is $61 per unit and the profit is $19 per unit. secondly accept the order of product Z its total cost is $51 per product and the profit is $6 per unit.Though the profits of Xand Z are same,but Z's cost of production per unit is less when compared to the cost of production of X. So accept Z over X. so it is First Y, then Z and finally X. b. Here the production of cost Y is $61, and profit margin per unit is $19 now they want to increase the sales,and the extra materials is available with the foreign supplier. So the company can pay upto $6 per unit ofextra cost of material, with this cost the cost of production will be $67 which is equal to the cost of production X, but still there will be a profit of $13 per unit which is more than the other two products by $7 per unit.