Table 7.7 A Company Makes Four Products That Have the Following Characteristics

question 52

Multiple Choice

Table 7.7
A company makes four products that have the following characteristics: Product A sells for $75 but needs $20 of materials and $20 of labor to produce;Product B sells for $90 but needs $45 of materials and $20 of labor to produce;Product C sells for $110 but needs $50 of materials and $30 of labor to produce;Product D sells for $135 but needs $75 of materials and $40 of labor to produce.The processing requirements for each product on each of the four machines are shown in the table. Work centers W,X,Y,and Z are available for 40 hours per week and have no setup time when switching between products.Market demand is 50 As,60 Bs,70 Cs,and 80 Ds per week.In the questions that follow,the traditional method refers to maximizing the contribution margin per unit for each product,and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 7.7.Using the traditional method,what is the optimal product mix?

• A)37 A,60 B,70 C,80 D
• B)50 A,51 B,70 C,80 D
• C)50 A,60 B,62 C,80 D
• D)50 A,60 B,70 C,60 D

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Definitions:

Revenue Variances

The difference between actual revenue and budgeted or expected revenue, analyzed to understand and manage financial performance.

Spending Variances

Spending variances are the differences between the actual amount spent and the budgeted or planned amount, often analyzed to control and manage expenses better.

Activity Variance

The difference between the budgeted cost for an activity level and the actual cost incurred, indicating deviations from planned performance.

Net Operating Income

A company's income after operating expenses have been deducted, but before income taxes and interest expenses are taken into account.