A Company Manufactures Three Products

question 38

Essay

A company manufactures three products.Each unit of product X requires 10 machine hours,each unit of product Y requires 4 machine hours,and each unit of product Z requires 6 machine hours.The company's productive capacity is limited to 180,000 machine hours.Each unit of product X sells for $15 and has variable costs of $7.Each unit of product Y sells for $8 and has variable costs of $3.Each unit of Z sells for $12 and has variable costs of $4.
Required:
a.Calculate the contribution margin per hour of each of the products.
b.Determine the preferred sales mix if there are no market constraints on any of the products.
c.Determine the preferred sales mix if the demand is limited to 20,000 units of each.

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Definitions:

Inflexible Production Technology

Manufacturing systems or technologies that cannot easily adapt to changes in product design, volume, or production process.

Product Requirements

Specifications or criteria that must be met for products to satisfy customer needs or regulatory standards.

Local Facilities

Physical locations or buildings situated within a specific area or community, serving as operational centers for businesses, services, or public use.

Compete on Price

A strategy where businesses attract customers and gain market share by offering lower prices than their competitors.