Homework SourseXYZ Company produces three products A B and C XYZs plant cap
XYZ Company produces three products, A, B, and C. XYZ\'s plant capacity is limited to 48,000 machine hours per year. The following information is available for planning purposes: Product A Product B Product C demand for next year ............. 24,000 units 25,000 units 12,000 units selling price per unit ........... $80 $120 $160 direct material cost per unit .... $24 $ 21 $ 38 direct labor cost per unit ....... $18 $ 50 $ 38 variable overhead cost per unit .. $22 $ 25 $ 54 It takes 0.80 machine hours to produce one unit of Product A; 1.25 machine hours to produce one unit of Product B; and 1.60 machine hours to produce one unit of Product C. Assume that XYZ Company can work its plant overtime for 8,000 additional machine hours. Overtime premiums will add 50% to direct labor costs. Calculate the total number of units of Product C that XYZ Company should produce in order to maximize its net income.
Solution
Availability and use of hours
If Additional overtime is done to manufacture the remaining units of B and c,contribution will be\"
since if overtime is done contribution of B will be negative so all of the overtime hours should be used for manufacturing C
Number of units of C that can be manufactured :8000 /1.60 = 5000 units
| A | B | C | |
| Selling price | 80 | 120 | 160 |
| less:variable cost | |||
| Direct material | 24 | 21 | 38 |
| Direct labor | 18 | 50 | 38 |
| variable overhead | 22 | 25 | 54 |
| Total variable overhead | (64) | (96) | (130) |
| contribution per unit | 16 | 24 | 30 |
| Hours required per unit | .80 | 1.25 | 1.60 |
| contribution per hour | 16/.80=$20 | 24/1.25=$19.2 | 30/1.6=18.75 |
| Ranking | 1 | 2 | 3 |
