XYZ Company produces three products, A, B, and C. XYZ\'s plant capacity is limit
ID: 2358778 • Letter: X
Question
XYZ Company produces three products, A, B, and C. XYZ's plant capacity is limited to 200,000 machine hours per year. The following information is available for planning purposes: Product A Product B Product C demand for next year ............. 100,000 units 200,000 units 150,000 units selling price per unit ........... $18 $28 $23 variable costs per unit .......... $16 $21 $20 It is known that it takes 0.40 machine hours to produce one unit of Product A; 0.70 machine hours to produce one unit of Product B; and 0.50 machine hours to produce one unit of Product C. Calculate the number of units of Product C that XYZ Company should produce in order to maximize its net income.Explanation / Answer
A B C
Selling price 18 28 23
Variable cost (16) (21) (20)
Contribution 2 7 3
Labor Hour 0.4 0.7 0.5
Cont per LB Hr 5 10 6
Priority 3 1 2
Product B: 200000 units x 0.7 = 140000 Labor Hours
Product C 120000 units x 0.5 = 60000 labor hours (restricted to 120000 units due to the contraint labor hours of 200000 hours)
Thus, only 120000 units of product C should be produced.
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