Question

Please provide explanation. Thank you

Selection of Most Profitable Product TEB produces two products with the per unit information given in the table below. Due to shortage of finishing time, TEB cannot produce the market demand of either product (i.e., TEB can sell as much ABC or XYZ as it can produce with the available finishing time). Indicate which product that will produce the most profit. Product per Unit Amounts Product per Unit Amounts ABC Product XYZ Sales price Variable cost 10 Fixed cost Operating income Hours of finishing time 0.50 0.25 Most profitable is ABC . Most profitable is XYZ The products are equally profitable No answer text provided.

Answer 1

Correct answer----------Most profitable is XYZ

Working

Statement of ranking indicating which product to produced first and second
	Product
	ABC	XYZ
Sales price per unit	$        50.00	$        80.00
Variable cost per unit	$        10.00	$        10.00
Contribution margin per unit	$        40.00	$        70.00
Finishing time per unit	0.50	0.25
Contribution margin per finishing hour	$        80.00	$     280.00

XYZ gives highest Contribution margin per hour hence XYZ is most profitable to produce.