Question

Mays Company can sell all of product A that it produces but only 160,000 units of...

Mays Company can sell all of product A that it produces but only 160,000 units of product Z. The company has limited production capacity. It can produce 6 units of A per hour or 10 units of Z per hour, and it has 30,000 production hours available. Contribution margin per unit is $12 for A and $10 for Z. What is the most profitable sales mix for this company?

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Answer #1

Company should produce only Product A using available production hours to earn maximum amount of profit.

Number of units of Product A produced = Number of production hours / Number of production hours used per unit
Number of units of Product A produced = 30,000 / (1/6)
Number of units of Product A produced = 180,000

Therefore, the most profitable sales mix for this company is 180,000 units of Product A and 0 units of Product Z.

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