Warrior Inc If Market Demand Exceeds the Available Capacity, in What Sequence

question 99

Multiple Choice

Warrior Inc. has 12,000 machine hours available each month. The following information on the company's four products is available:
$\begin{array}{lrrrrrr}&\text { Product W }&\text { Product X }&\text { Product Y }&\text { ProductZ}&\\\text { Selling price per unit } & \$ 20.00 & \$ 21.00 & \$ 17.50 & \$ 15.00 \\\text { Variable cost per unit } & \$ 10.00& \$ 9.00 & \$ 7.50 & \$ 10.00 \\\text { Machine hours per unit } & 2 & 3 &4 &1.5 \\\end{array}$

If market demand exceeds the available capacity, in what sequence should orders be filled to maximize the company's profits?

• A) Product W first, product X second, product Z third, and product Y last.
• B) Product Z first, product W second, product X third, and product Y last.
• C) Product X first, product W second, product Y third, and product Z last.
• D) Product X first, product Z second, product Y third, and product W last.

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Definitions:

Residual Value

The estimated value of a leased asset at the end of the lease term, or the expected value of an asset after its useful life ends.

Depreciation Rate

The percentage or method used to calculate the decrease in value of an asset over time due to use, wear and tear, or obsolescence.

FIFO Approach

A method of inventory valuation where the first items put into inventory are the first ones to be recorded as sold.

Sum-Of-The-Years'-Digits Method

A depreciation technique that results in a more accelerated write-off of an asset over its useful life, by applying a decreasing fraction to its depreciable cost.