Marley Corporation makes three products (X, Y, & Z) with thefollowing characteristics:
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
The company has a capacity of 2,000 machine hours, but there isvirtually unlimited demand for each product. In order to maximizetotal contribution margin, how many units of each product shouldthe 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
Marley Corporation makes three products (X, Y, & Z) with thefollowing characteristics:
| 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 | |||
The company has a capacity of 2,000 machine hours, but there isvirtually unlimited demand for each product. In order to maximizetotal contribution margin, how many units of each product shouldthe 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
Related questions
Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available.
| Product G | Product B | ||||||||||
| Selling price per unit | $ | 120 | $ | 150 | |||||||
| Variable costs per unit | 45 | 90 | |||||||||
| Contribution margin per unit | $ | 75 | $ | 60 | |||||||
| Machine hours to produce 1 unit | 0.4 | hours | 1.0 | hours | |||||||
| Maximum unit sales per month | 500 | units | 250 | units | |||||||
The company presently operates the machine for a single eight-hour shift for 22 working days each month. Management is thinking about operating the machine for two shifts, which will increase its productivity by another eight hours per day for 22 days per month. This change would require $7,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)
Determine the contribution margin per machine hour that each product generates
| Product G | Product B | Total | |
| Contribution Margin per unit | $75.00 | $60.00 | |
| Machine hours per unit | 0.4 | 1.0 | |
| Contribution margin per machine hour | $187.50 | $60.00 | |
| Maximum number of units sold | 500 | 250 | |
| Hours required to produce maximum units | 200 | 250 | 450 |
How many units of Product G and Product B should the company produce if it continues to operate with only one shift? How much total contribution margin does this mix produce each month?
| Product G | Product B | Total | |
| Hours dedicated to the production of each product | |||
| Units produced for most profitable sales mix | |||
| Contribution margin per unit | |||
| Total contribution margin - one shift |
3. If the company adds another shift, how many units of Product G and Product B should it produce? How much total contribution margin would this mix produce each month?
| Product G | Product B | Total | |
| Hours dedicated to the production of each product | |||
| Units produced for most profitable sales mix | |||
| Contribution margin per unit | |||
| Total contribution margin - two shifts |
4. Suppose that the company determines that it can increase Product Gâs maximum sales to 600 units per month by spending $6,500 per month in marketing efforts. Should the company pursue this strategy and the double shift?
| Product G | Product B | Total | |
| Hours dedicated to the production of each product | |||
| Units produced for most profitable sales mix | |||
| Contribution margin per unit | |||
| Total contribution margin - two shifts and marketing campaign |
Exercise 16-18 The product mix decision LO 2, 3
ABC Company produces Product X, Product Y, and Product Z. Allthree products require processing on specialized finishingmachines. The capacity of these machines is 2,190 hours per month.ABC Company wants to determine the product mix that should beachieved to meet the high demand for each product and provide themaximum profit. Following is information about each product:
| Product X | Product Y | Product Z | |||||||
| Selling price | $ | 151 | $ | 119 | $ | 37 | |||
| Variable costs | 103 | 58 | 31 | ||||||
| Machine time per unit | 3 | hours | 3 | hours | 1 | hour | |||
| Monthly demand (units) | 430 | 300 | 745 | ||||||
Required:
Determine how the 2,190 hours of machine time should beallocated to the three products to provide the most profitableproduct mix. (Do not round intermediatecalculations.)
