Question

XYZ Company produces three products, A, B, and C. XYZ's plant capacity
is limited to 48,000 machine hours per year. The following information
is available for planning purposes:

                                    Product A       Product B       Product C
demand for next year .............  24,000 units   25,000 units   12,000 units
selling price per unit ...........    $80             $120            $160
direct material cost per unit ....    $24             $ 21            $ 38
direct labor cost per unit .......    $18             $ 50            $ 38
variable overhead cost per unit ..    $22             $ 25            $ 54 

It takes 0.80 machine hours to produce one unit of Product A; 1.25 machine
hours to produce one unit of Product B; and 1.60 machine hours to produce
one unit of Product C.

Calculate the total number of units of Product B that XYZ Company should
produce in order to maximize its net income.

Answer 1

Calculate the total number of units of Product B that XYZ Company should
produce in order to maximize its net income.

	Product A	Product B	Product C
Contribution margin per unit	16	24	30
Machine hour per unit	0.80	1.25	1.60
Contribution margin per hour	20	19.2	18.75
Rank	1	2	3

Total hours available = 48000 machine hour

Product A machine hour used = 24000*.80 = 19200 hour

Rest hour use for product B = (48000-19200)/1.25 = 23040 unit

so answer is 23040 unit of Product B that XYZ Company should

produce in order to maximize its net income