Question

XYZ Company produces two products, A and B. For the coming period, 135,000 machine hours and 182,000 direct labor hours are available. Information on the two products appears below: contribution margin per unit ...... machine hours per unit ............... direct labor hours per unit ...... Product A $7.00 4.00 - 8.00 Product B $6.50 6.00 7.00 Calculate the number of units of Product B that should be produced in order to maximize net income.

Answer 1

Let number of units for product be X and that of product B be Y

Now for machine hours , 4X + 6Y= 135000

OR X = [135000-6Y] /4                   [Equation 1 ]

For direct labor hours , 8X + 7Y = 182000

Putting value of X from equation 1 in this equation

                           8[(135000-6Y)/4 ] + 7Y = 182000

                            2[135000-6Y] + 7Y =182000

                            270000-12Y +7Y = 182000

                             -12Y + 7Y = 182000- 270000

                               -5Y = - 88000

                                 Y = -88000/-5

                                    = 17600 Units

Number of units of product B that should be produced to maximize income = 17600 units