Elliot Company can sell all of its products A and Z that it can produce, but it

Question

Elliot Company can sell all of its products A and Z that it can produce, but it has limited production capacity. It can produce 8 units of A per hour or 10 units of Z per hour, and it has 20,000 production hours available. Contribution margin per unit is $12 for A and $10 for Z. What is the most profitable sales mix for Elliot Company?

A. 84,000 units of A and 60,000 units of Z.

B. 48,000 units of A and 80,000 units of Z.

C. 60,000 units of A and 100,000 units of Z.

D. 120,000 units of A and 0 units of Z.

E. 0 units of A and 200,000 units of Z.

Explanation / Answer

E. 0 units of A and 200,000 units of Z. Statement showing computations Particulars A Z Units in 1 hour or 60 minutes                     8.00                              10.00 Time per unit in minutes                     7.50                                 6.00 Contribution per unit                   12.00                              10.00 Contribution per minutes                     1.60                                 1.67 Ranking                     2.00                                 1.00 Total Hours Available          20,000.00 Units in 1 hour of z                   10.00 Total Units of Z = 20,000*10        200,000.00

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