Question

Darren Company produces three products with the following costs and selling prices:

	Product
	X				Y				Z
Selling price per unit	$	150			$	76			$	90
Variable costs per unit		90				38				54
Contribution margin per unit	$	60			$	38			$	36
Direct labor hours per unit		4				2				2
Machine hours per unit		5				7				4

If Darren has a limit of 22,200 direct labor hours but no limit on units sold or machine hours, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:

Answer 1

Answer
Ranking of the products from the most profitable to the least profitable use of the constrained resource is:
	Product
Particulars	X	Y	Z
a. Selling price per unit	150	76	90
b. Less: Variable costs per unit	90	38	54
c. Contribution margin per unit (a-b)	60	38	36
d. Direct labor hours per unit	4	2	2
e. Contribution Margin Per Direct labor hours (c/d)	15	19	18
Rank	C	A	B
*Constrained resource is: direct labor hours.