Question

ABC Company produces Product X, Product Y, and Product Z. All three products require processing on specialized finishing machines. The capacity of these machines is 2,250 hours per month. ABC Company wants to determine the product mix that should be achieved to meet the high demand for each product and provide the maximum profit. Following is information about each product:

	Product X			Product Y			Product Z
Selling price	$	151		$	120		$	38
Variable costs		105			58			30
Machine time per unit		3	hours		3	hours		1	hour
Monthly demand (units)		440			310			755

Required:

Determine how the 2,250 hours of machine time should be allocated to the three products to provide the most profitable product mix. (Do not round intermediate calculations.)

Answer 1

	CALCULATION OF CONTRIBUTION MARGIN PER MACHINE HOURS AND RANKING OF THEM
		Product X	Product Y	Product Z
	Selling Price	151	120	38
	Less: Variable Cost	$                             105	$                                       58	$                               30
	Contribution Per Unit	46	62	8
	Divide by Machine Hours required per unit	3 Hours	3 Hours	1 Hours
	Contribution per machine hours =	$                          15.33	$                                 20.67	$                           2.67
	Ranking	2 nd Rank	Ist Rank	3 rd Rank
	SCHEDULE OF PRODUCTION FOR MAXIMUM PROFIT
	PARTICULARS	Product	Maximum No. of Units	Unit Per Hours	Total Hrs. Required	Balance Hours
	Total Hours Available					2,250
	Production of Product Y First	Y	310	3	930	1,320
	Production of Product X Second	X	440	3	1320	-
	Production of Product Z In last	Z	0		0	-
	Note : There is no balance hours available for Product Z so no production is made for this product
	Answer =
	Most Profitable product Mix
	Product Y =	310 Units
	Product X =	440 Units