A Company Produces Three Different Products That All Require Processing

question 10

Essay

A company produces three different products that all require processing on the same machines.There are only 17,000 machine hours available in each year.Production information for each product is:
$\begin{array}{lrrr}&\text { A}&\text { B}&\text { C}\\\text { Sales price per unit } & \$ 22.00 & \$ 34.00 & \$ 46.00 \\\text { Variable costs per unit } & \$ 10.00 & \$ 19.00 & \$ 25.30 \\\text { Machine hours necessary to produce one unit } & .75 & 1.2 & 2.3\end{array}$
Required:
a.Determine the preferred sales mix if there are no market constraints on any of the products.
b.Determine the preferred sales mix if the demand is limited to 7,000 units for each product.
c.Determine the preferred sales mix if the demand is limited to 8,000 units for each product.

---

Definitions:

Preferred Stock

A class of ownership in a corporation with a priority claim on assets and earnings before common stock.

Common Stock

A form of corporate equity ownership, a type of security representing an ownership stake in a corporation.

Market Price

The immediate rate at which assets or services are traded in the open market.

Par Common Stock

The nominal or face value of a share of common stock, as stated in the corporate charter.