Darren Company Produces Three Products with the Following Costs and Selling

question 33

Multiple Choice

Darren Company produces three products with the following costs and selling prices:
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Products }$
$\begin{array}{lrrrrr}&\text {X}&\text {Y}&\text {Z}\\\text { Selling price per unit } & \$ 40 & \$ 30 & \$ 35 \\\text { Variable costs per unit } & 24 & 16 & 20 \\ \text { Contribution margin per unit } & \$ 16 & \$ 14 & \$ 15\\\text { Direct labor hours per unit } & 4 & 2 & 3 \\\text { Machine hours per unit } & 5 & 7 & 4\end{array}$

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If Darren has a limit of 20,000 direct labor hours but no limit on units sold or machine hours, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:

• A) X, Y, Z.
• B) Y, Z, X.
• C) X, Z, Y.
• D) Z, Y, X.

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Definitions:

Usage of Trade

Customary practices and usages that parties to a transaction in a particular trade commonly observe.

Commercial Dealing

Activities involved in the purchase and sale of goods and services in the marketplace.

Industry

The economic activity concerned with the production of goods, services, and the extraction of raw materials.

Requirements Contract

An agreement in which one party agrees to purchase all of his or her requirements of a particular product from another party. See also output contract.