Question

Castor Corp. produces three products, and is currently facing a labor shortage only 9,600 hours are available this month. The selling price, costs, labor requirements, and demand of the three products are as follows: Selling price Variable cost per unit Direct labor hours per unit Demand Product A $160.60 $112.89 1.se 3,289 Product $140.00 $ 56.ee 3.ee 6,480 Product C $150.00 $1e5.ee 2.ee 1,600 How many of each product should be sold during the labor shortage to maximize profit? Multiple Choice 0 6400 of Product A0 of Product B, and of Product C 0 3.200 of Product A 6.400 of Product B, and 1.600 of Product of Product A 3.200 of Product B, and of Product 3.200 of Product A 1600 of Product B, and of Product

Answer 1

	Product A	Product B	Product C
Selling price	160.00	140.00	150.00
(-) Variable cost per unit	112.00	56.00	105.00
Contribution margin per unit	48.00	84.00	45.00
(/) Direct labor hours per unit	1.50	3.00	2.00
Contribution margin per direct labor hour	32.00	28.00	22.50

As the direct labor hours is in shortage, the company will produce the products in the order of higher contribution margin per direct labor hour.

Ranks	Product
1	A
2	B
3	C

	Product A	Product B	Product C
Direct labor hours per unit	1.50	3.00	2.00
(*) Demand	3200	6400	1600
Total Direct labor hours needed	4800	19200	3200

Total direct labor hours available	9600
Direct labor hours left after producing product A = Total direct labor hours available - Total direct labor hours available for product A = 9600 - 4800	4800
With the Direct labor hours left after producing product A, only few units of product B can be produced
Units of product B the can be produced = Direct labor hours left after producing product A / Direct labor hours per unit of product B = 4800 / 3.00	1600	units
So, the answer is : 3200 of product A, 1600 of product B and 0 of product C