Farris Company Reported the Following Information for Its Two Products

question 25

Multiple Choice

Farris Company reported the following information for its two products: $\begin{array}{|l|c|c|}\hline & \text { Product } \mathrm{X} & \text { Product Y } \\\hline \text { Selling price per unit } & \$ 25 & \$ 35 \\\hline \text { Variable cost per unit } & 15 & 20 \\\hline\end{array}$ Due to labor constraints,demand for each of the products is greater than its supply.Product X requires 1 hour of labor to produce and product Y requires 3 hours of labor to produce.Which of the following statements is

• A) Product X should be produced and sold because it has a lower cost than Product Y.
• B) Product X should be produced and sold because it provides a higher contribution margin per labor hour than Product X.
• C) Product Y should be produced and sold because it provided a higher contribution margin per unit than Product X.
• D) Product Y should be produced and sold because it provides more revenue than Product X.

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Definitions:

Stock Dividend

A dividend payment made to shareholders in the form of additional shares of the issuing corporation's stock, rather than cash.

Retained Earnings

The portion of net income not distributed as dividends to shareholders but retained by the company for reinvestment in its core business, or to pay debt.

Common Stock

A type of equity ownership in a corporation, where holders have voting rights and potentially receive dividends.

Capital Surplus

funds raised by a company through issuing shares at a price above their par value.