ABC Company produces Product X, Product Y, and Product Z. All three products req

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 1,460 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 Product X $151 104 Product Y $ 118 62 Product Z S 35 28 Selling price Variable costs Machine time per unit Monthly demand (units) 2 hours 2 hours 1 hour 430 300 750 Required Determine how the 1,460 hours of machine time should be allocated to the three products to provide the most profitable product mix. (Do not round intermediate calculations.) Allocated Machine Time Product X Product Y Product Z hours hours hours

Explanation / Answer

Contribution margin per hour :

Allocation machine hour

Product X Product Y Product Z Sale price 151 118 35 Variable cost per unit 104 62 28 Contribution margin per unit 47 56 7 Time per unit 2 2 1 Contribution margin per hour 23.5 28 7

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