Peyton Company manufactures Phone X and Phone Y. Peyton can sell all it can make

Question

Peyton Company manufactures Phone X and Phone Y. Peyton can sell all it can make of either. Based on the following data, assuming the number of hours is a constraint, which statement is true?

                                           X                  Y

Sales Price                       $48               $44

Varaible Cost                    38                 28

Time needed to process     5 hours           8 hours

A. Y is more profitable than X.

B. X is more profitable than Y.

C. Neither X nor Y is profitable

D. X and Y are equally profitable

Explanation / Answer

X Y Sales price per unit 48 44 Variable cost per unit 38 28 Contribution per unit 10 16 Time needed per unit 5 8 hours contribution per hour 2 2 option D is correct ie X and Y are equally profitable

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