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Smythe Manufacturing Has 27,000 Labor Hours Available for Producing X

question 56

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Smythe Manufacturing has 27,000 labor hours available for producing X and Y. Consider the following information:  Product X  Product Y  Required labor time per unit (hours)  23 Maximum demand (units)  6,0008,000 Contribution margin per unit $5.00$6.00 Contribution margin per labor hour $2.50$2.00\begin{array}{lcc}&\text { Product X } &\text { Product Y }\\\text { Required labor time per unit (hours) } & 2 & 3 \\\text { Maximum demand (units) } & 6,000 & 8,000 \\\text { Contribution margin per unit } & \$ 5.00 & \$ 6.00 \\\text { Contribution margin per labor hour } & \$ 2.50 & \$ 2.00\end{array} If Smythe follows proper managerial accounting practices, how many units of Product Y should it produce?


Definitions:

Revenue

The overall revenue produced by a corporation through its primary business of selling goods or services.

Consumer Surplus

The variance between the price consumers are prepared to pay for a product or service and the price they actually incur.

Value

The importance, worth, or usefulness of something, often expressed in monetary terms but can also represent sentimental or intrinsic worth.

Sales Tax

A tax levied on the sale of goods and services, typically calculated as a percentage of the purchase price and collected by the retailer.

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