The following diagram shows the flow process, raw material costs, and machine pr
ID: 378795 • Letter: T
Question
The following diagram shows the flow process, raw material costs, and machine processing time for three products: A, B, and C. There are three machines (W, X, and Y) used in the production of these products; the times shown are in required minutes of production per unit. Raw material costs are shown in cost per unit of product. The market will take all that can be produced.
Assuming that sales personnel are paid on a commission basis, which product should they sell?
On the basis of maximizing gross profit per unit, which product should be sold?
To maximize total profit for the firm, which product should be sold?
The following diagram shows the flow process, raw material costs, and machine processing time for three products: A, B, and C. There are three machines (W, X, and Y) used in the production of these products; the times shown are in required minutes of production per unit. Raw material costs are shown in cost per unit of product. The market will take all that can be produced.
a.Assuming that sales personnel are paid on a commission basis, which product should they sell?
Product A Product B Product C b.On the basis of maximizing gross profit per unit, which product should be sold?
Product B Product A Product C c.To maximize total profit for the firm, which product should be sold?
Product A Product B Product C $60 $55 %70 Selling Price Y 3 min. Y 5 min. X 4 min. $10 $10 $10 W 2 min. X 6 min. Y 6 min $15 $20 $20 X 1 min. W 2 min. W 5 min. $15 $30 $15Explanation / Answer
a) For commission, the criteria is to sell maximum number of units.
Output for A: 1+2+3 = 6 min per unit
Output for B: 5+6+2 = 13 min per unit
Output for C: 4+6+5 = 15 min per unit
Hence, Product A
b) For maximizing gross profit per unit = Selling price - Total material cost price
Product A = 60-(10+15+15) = 20
Product B = 55-(10+20+15) = 10
Product C = 70 - (10+20+30) = 10
Hence, Product A
c) To maximize total profit for firm, the profit per min can be computed for each product
A = Profit per unit/Time per unit = 20/6 = 3.33
B = 10/13 = 0.92
C = 10/15 = 0.66
Hence, Product A
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