Hobson Limited Produces Two Products, the X and Y, Which

question 2

Multiple Choice

Hobson Limited produces two products, the X and Y, which both use the same grade of specialist labour. Only 3800 specialist labour hours are estimated to be available for the 20X1 financial year because of skills shortages in the economy as a whole.
Ideally the directors would like to sell 500 units of X and 500 units of Y but they recognize the actual amount that can be produced and sold is likely to be limited by the labour shortage.
The following information is available about the products:

What is the optimal production plan for 20X1 (to the nearest whole unit) ?

• A) 400 units of X and 200 Y
• B) 171 units of X and 400 units of Y
• C) 300 units of X and 400 units of Y
• D) 400 units of X and 144 units of Y

---

Definitions:

Net Sales

Sales revenue minus returns, allowances, and discounts.

Cost Of Goods Sold

The direct costs attributable to the production of goods sold by a company, including material and labor costs.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets, which exclude inventory.

Quick Ratio

A liquidity ratio that measures a company's ability to pay its short-term obligations with its most liquid assets.