Question

uestloh 6 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 21,000 units Product B 28,000 units $120 $80 demand for next year ..... selling price per unit .... direct material cost per unit direct labor cost per unit .... variable overhead cost per unit. Product C 35,000 units $160 $ 36 $ 62 $ 33 $24 $ 22 $ $22 It takes 0.80 machine hours to produce one unit of Product A; 1.20 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. 26,000

I'm not sure with my answer.

Answer 1

Answer: 26,000 is correct.

	Product A	Product B	Product C
Selling price per unit (a) $	80	120	160
Less: Variable costs
Direct material	24	22	36
Direct labor	18	50	62
Variable overhead	22	25	33
Total variable costs (b)	64	97	131
Contribution margin per unit (c) = (a)- (b)	16	23	29
Machine hours required per unit (d)	0.80	1.20	1.60
Contribution margin per machine hour (e) = (c)/(d)	20	19.17	18.13
Ranking	I	II	III
Number of units to produce (demand)	21000
Machine hours required (21000 x 0.80)	16800
Remaining machine hours available (48000 - 16800)		31200
Number of units to produce (31200/1.20)		26000