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. Calculate the total number of units of Product B that XYZ Company should produce in order to maximize its net income.
Solution
Calculate contribution margin per hour :
Product A used machine hour = 24000*.8 = 19200 hour
Product B Number of unit produced = (48000-19200)/1.25 = 23040 units
So Total number of units of product B Should produce for maximize its net incomeis 23040 units
| Product A | Product B | Product C | |
| Selling price per unit | 80 | 120 | 160 |
| Direct material per unit | 24 | 21 | 38 |
| Direct labour per unit | 18 | 50 | 38 |
| Variable overhead cost per unit | 22 | 25 | 54 |
| Contribution margin per unit | 16 | 24 | 30 |
| Machine hour per unit | 0.80 | 1.25 | 1.60 |
| Contribution margin per hour | 20 | 19.20 | 18.75 |
| Rank | I | II | III |
